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Retail bosses urge Chancellor to reduce youth employment costs in first budget

Healey under pressure on NICs threshold and capital gains tax

By LineZotpaper
Published
Read Time2 min
Sources3 outlets
Some of the UK's biggest retailers and hospitality firms, including Tesco, Costa Coffee, the Co-op, Marks & Spencer and Sainsbury's, met Chancellor John Healey at the Treasury on Tuesday to urge a cut in the cost of employing young people ahead of his first budget. They are calling for a partial reversal of a change by Healey's predecessor Rachel Reeves that lowered the earnings threshold for employers' national insurance contributions (Nics), and hope for relief on business rates. Separately, Healey has reportedly rejected calls to equalise capital gains tax with income tax rates, though a smaller increase may be considered.

At the meeting, sector leaders including M&S boss Stuart Machin and Sainsbury's chief executive Simon Roberts argued that Reeves' decision to lower the NICs threshold from £9,100 to £5,000 a year has contributed to a plunge in high street jobs for young people and a rise in youth unemployment. They want the threshold raised to £6,000, saying it would help create jobs and ease inflation pressures.

One source close to the meeting said they were optimistic on both the NICs threshold and business rates. "It felt like they were listening," the source said. Healey has vowed to ease the cost of doing business amid mounting pressures from rising energy bills.

Helen Dickinson, chief executive of the British Retail Consortium, which represents most big retailers, said: "Retail is a major driver of growth, supporting jobs, investment and communities across the country, and providing vital first jobs and career opportunities for young people." She added that after a 20% increase in retailers' taxes in two years, including an extra £6.5bn in new employment costs, "any new costs will be paid by consumers at the till and make it harder for retailers to create jobs."

Meanwhile, according to the Financial Times, Healey has dismissed calls from Labour MPs and thinktanks to equalise capital gains tax (CGT) rates with income tax, a move economists say could raise £11.3bn a year. He is concerned it could deter inward investment, but may still opt for a smaller increase in CGT short of full equalisation. Reeves had already raised CGT in her 2024 budget: basic-rate taxpayers now pay 18% (up from 10%) and higher-rate taxpayers pay 24% (up from 20%), compared with income tax rates of 20%, 40% and 45%.

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Analysis

Why This Matters

  • Youth unemployment in the UK is rising; changes to the NICs threshold directly affect the viability of entry-level jobs in retail and hospitality.
  • Employment cost increases are often passed to consumers through higher prices, so the budget decision has broader implications for inflation and high street spending.
  • The CGT debate highlights a fundamental policy tension between raising revenue from wealth and maintaining incentives for investment.

Background

Rachel Reeves, in her first budget in 2024, cut the earnings threshold for employer NICs from £9,100 to £5,000 per year, significantly increasing the tax burden on employers of part-time and low-paid workers. She also raised capital gains tax rates. Chancellor John Healey, who succeeded Reeves, is now preparing his first budget and has signalled a desire to ease business costs, but faces competing pressures on tax fairness and fiscal responsibility.

Key Perspectives

Retailers and hospitality firms: They argue the NICs threshold change has destroyed youth jobs and want it raised to £6,000, alongside business rates relief. They stress that further cost increases will hit consumers and job creation. Chancellor John Healey: He has pledged to reduce costs for business but has reportedly ruled out full CGT equalisation due to fears it could deter investment, though a more modest CGT rise remains possible. Labour MPs and thinktanks: They push for equalising CGT with income tax rates, arguing it would raise substantial revenue and address a long-standing inequity in the tax system.

What to Watch

  • The budget day announcement for specific changes to the NICs earnings threshold and any business rates relief.
  • Any movement on CGT rates, particularly whether Healey opts for an increase that falls short of full equalisation.
  • Official youth unemployment figures in the months following the budget, which will indicate whether the measures are having the desired effect.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

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