British employers warned on Tuesday of a hit to hiring if finance minister Rachel Reeves increases their social security costs in her first budget on Oct. 30.
Reeves needs to raise billions of pounds to fund more spending on public services, and on Monday she declined to rule out raising the national insurance contributions (NICs) that businesses must pay.
The head of a group representing pubs, restaurants and hotels said such a move would be a tax on jobs.
“An increase would particularly hammer sectors like hospitality, where staffing costs are the biggest business expense,” Kate Nicholls, chief executive of UKHospitality, said.
“Hospitality businesses are much less able to stomach yet another cost increase, when they’re already managing increases in other areas like wages, food, drink and energy.”
The British Chambers of Commerce, representing typically small businesses, also expressed concern.
Companies are already facing higher costs from the new government’s planned employment reforms, Jane Gratton, the BCC’s deputy director of public policy, said.
Data published earlier on Tuesday showed some signs of a softening in Britain’s jobs market.
Relief on NICs payments that employers get in return for making contributions to the pension plans of their staff cost the government around 17 billion pounds ($22 billion) a year, according to the Institute for Fiscal Studies think tank.
Tom Selby, director of public policy at pensions firm AJ Bell, said Reeves might make that system less generous.
“Politically, this would also be less risky as it wouldn’t hit voters directly in the pocket — although there is a danger employers will scale back remuneration, including pensions,” Selby said.
Reeves and Prime Minister Keir Starmer promised voters before July’s election that they would not increase the main rates of tax on working people, specifically income tax, value-added tax and national insurance.
The opposition Conservatives accused Reeves of breaking that promise because higher NICs payments by employers would end up hitting staff.
($1 = 0.7648 pounds)
(Writing by William Schomberg; Editing by Hugh Lawson)
