Yorkshire Businesses Urge Chancellor to Cut National Insurance for Young Workers

Businesses in Yorkshire are appealing to Chancellor John Healey to reduce National Insurance (NI) contributions for employees under the age of 25. The West & North Yorkshire Chamber of Commerce, representing approximately 5,000 employers, argues that such a cut would help address a "youth unemployment crisis."

Chancellor Healey is scheduled to present his first budget on October 28. He has not ruled out potential tax increases, acknowledging that government borrowing costs are at "historic highs." Some businesses have expressed to the BBC that they are still contending with the impact of employer NI contribution increases implemented in 2024 and are seeking tax relief.

Aqila Choudhry, managing director of Leeds-based care home provider Love in Care, stated that businesses have faced escalating costs over the past decade, and that a previous Labour budget exacerbated these challenges. "The shock of the increase in National Insurance contributions [for employers] in 2024 really hit everyone as it was not expected and the impact is still being felt," Choudhry said. She emphasized the need for support to ensure businesses can "survive, sustain and grow," and voiced opposition to further tax hikes. Choudhry also supports the chamber's proposal to lower employer NI contributions for under-25s, believing it would help reduce the number of young people not in education, employment, or training.

Ken Murray, principal of York College, also advocates for increased support for young individuals entering the job market. He suggested that further education colleges should be eligible for a VAT rebate, which he believes would help rectify funding disparities between them and academies or free schools. Sixth-form colleges that offer free education to 16- to 18-year-olds are currently unable to reclaim VAT under the government's rebate scheme.

"We could spend more money on young people so they can do what they need to do in the community and make sure we are challenging those not in education, employment or training and get them onto high-quality jobs," Murray commented. He also suggested that "more flexibility around money that is currently ring-fenced" could enable colleges to better assist young people in pursuing education. Murray noted that uptake for existing free courses aimed at the unemployed has been "really low," and that it is difficult to secure funding for individuals already in employment who wish to upskill.

Martin Greenhow, who operates bars in Harrogate, Leeds, and Sheffield, described the hospitality sector as having "been reeling since Covid." He observed changes in consumer behavior, with more people working from home and reduced social activity, leading to a 30% drop in Friday business compared to pre-pandemic levels. Greenhow described the increase in employer National Insurance contributions as "a bitter pill" that directly resulted in layoffs at his establishments.

He proposed adjusting income tax thresholds to increase disposable income for consumers, which he believes would stimulate spending in sectors like hospitality and retail. "People don't have the money in their pocket they once did and if they don't have it they can't spend it with us in hospitality or in retail," Greenhow stated. He also called for action on business rates and expressed hope for a VAT reduction for the hospitality sector, arguing that such a measure would help struggling businesses survive, enable expansion and investment, and ultimately reduce benefit claims by creating more jobs.

The Chancellor's options for revenue generation are constrained by the Labour party's 2024 manifesto pledge not to raise income tax, National Insurance, or VAT. In a September speech, Healey outlined his "defining mission as chancellor" as achieving "growth, good growth in every postcode," and detailed his strategy to involve more devolution, public leadership, investment, innovation, and job creation.