Chancellor’s National Insurance hike will backfire on business and the economy

Unless you’ve been hiding under a rock, anyone in business will know that from April, the government is hiking employer National Insurance Contributions (NICs) from 13.8% to 15%.

It’s expected to rake in an extra £25 billion for the Treasury. But this isn’t just another tax rise, it’s a tax on jobs, and it’s going to backfire spectacularly.

Instead of generating more money, it will push businesses to cut jobs, stop hiring, or even shut down altogether, leading to fewer people in work, lower tax revenues, and more pressure on the benefits system. It’s basic economics, yet the government seems blind to the reality of what’s coming.

Employers across the UK are already warning that this increase will force them to make some tough decisions. Many are halting recruitment, cutting back staff hours, or reducing their workforce entirely.

Others are looking at scaling down operations or closing altogether. Businesses are already drowning in rising costs, from soaring energy bills and increased supplier prices to higher wages and red tape. This NICs increase is just another kick in the teeth for employers, and the unintended consequence will be fewer people in work and a bigger drain on the welfare system.

The reality is that businesses won’t just roll over and accept this. They’ll do what they need to survive, and that includes moving towards a cash-in-hand economy.

If the cost of employment keeps rising, more businesses will find ways to sidestep the system, paying workers off the books to avoid NICs. This is a disaster waiting to happen. Not only does it mean lost tax revenue for the Treasury, but it also leaves workers without job security, proper wages, or pension contributions.

It’s a return to the black economy, a step back to the days when ‘cash only’ was the norm in many trades. This doesn’t just hurt the government, it hurts everyone.

The biggest problem with this tax grab is that it’s built on a flawed assumption. The government seems to believe that businesses will simply absorb the extra cost and carry on as normal.

But they won’t. They can’t. Every job cut means lost tax revenue. Every business closure means less corporation tax, VAT, and business rates.

Every company that scales back means less spending, less investment, and fewer opportunities. Instead of filling the Treasury’s pockets, this tax increase will empty them, wiping out the supposed gains and leaving the economy in a worse state than before.

A better approach would be to encourage business growth. If companies are thriving, they naturally generate more tax revenue, through employment, investment, and expansion. Strong businesses mean more jobs, not fewer.

But by making it more expensive to hire people, the government is effectively putting a cap on economic growth. It’s a short-sighted, self-defeating policy that will do more harm than good.

Rachel Reeves may think she’s filling a hole in the budget, but she’s digging a bigger one. This isn’t just bad for business owners, it’s bad for workers, bad for tax revenue, and ultimately, bad for Britain.