Rachel Reeves is set to reveal a raft of pension reforms this week, which aim to funnel funds into infrastructure and private businesses.
In her inaugural Mansion House speech in the City of London, the Chancellor is expected to “spell out the next phase” of Labour’s governmental plan, following her key promise in October’s Budget to “fix the foundations” of the economy.
Her address on Thursday will be delivered amidst criticism from the hospitality sector, including signatories of a letter coordinated by UKHospitality, who cautioned that alterations to employers’ National Insurance contributions could result in job losses.
As she unveils her pension changes, which Treasury insiders suggest could free up billions for crucial infrastructure and businesses, Ms Reeves will advocate for “growth brought by unlocking private sector investment, including in our financial services industry, and growth brought about by reform both of our economy and of our public services”.
The Chancellor is also predicted to emphasise “the untapped potential we have here in Britain, the opportunities available that can be realised, the partnerships that can be forged, the wealth that can be created” as “the prize on offer”.
This may encompass partnerships with economies in Europe, the Middle East, Asia and the US, according to the PA news agency.
During the Autumn Budget, Ms Reeves unveiled a change to the amount employers pay in National Insurance Contributions (NICs), expected to raise more than £25billion for the Treasury.
The adjustment sees an uptick in the rate from 13.8 percent to 15 percent, coupled with a lowering of the threshold for when employers begin to pay the tax, dropping from £9,100 annually to just £5,000.
However, in a stark warning issued on Sunday, board members of UKHospitality and executives from over 200 businesses, including big names like JD Wetherspoon, IHG Hotels and Resorts, and Tortilla, have expressed grave concerns that “changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
They further cautioned: “Unquestionably they will lead to business closures and job losses within a year.”
Highlighting the financial strain, they added: “The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.”
Moreover, they stressed the impossibility of shifting the financial burden onto consumers, stating: “There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8 percent, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more.”
Consequently, they warned that many firms would be compelled to “Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.”
The letter concluded with a reminder to the Government: “We know you are determined to ensure that growth is available to all.
“Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.”
They have recommended that Ms Reeves introduce a new NICs band between the new £5,000 and old £9,100 thresholds proposing a reduced 5 percent rate or advocate for an exemption for lower band taxpayers working fewer than 20 hours per week, aiming to back workers in part-time and less remunerative positions.