It’s our worst NIGHTMARE: Business braces for a ‘perfect storm’ in Halloween Budget

Rachel Reeves was last night accused of turning her back on economic growth as the business community prepares for a budget attack that will drive up costs and threaten livelihoods.

The Chancellor will today hit British businesses with an increase in employers’ national insurance contributions to 2p, after previously labeling the levy a ‘tax on jobs’.

The raid on National Insurance – which could raise as much as £20 billion – is accompanied by an inflation-busting 6.7 per cent minimum wage increase and a workers’ rights package costing companies £5 billion a year.

The Institute of Directors described the triple whammy as a ‘perfect storm’, while the Institute for Fiscal Studies (IFS) said the higher costs facing businesses could cost jobs.

Former CBI president Lord Bilimoria, the founder and chairman of Cobra Beer, accused the government of reneging on its promise to put economic growth at the heart of its plans.

“This budget will make many of our worst nightmares come true,” he told the Mail.

‘They keep talking about growth, but they do everything they can to stop growth. Every measure they take will hinder growth. It will be a huge burden on businesses and a dampener on investments. National Insurance is a tax on jobs.”

Nick Mackenzie, chief executive of pub group Greene King, said: ‘There are a number of cost increases coming through that are impacting our sector and our businesses, potentially impacting our ability to invest in growth in the long term.’

The budget will leave Labor facing claims it has broken its manifesto pledge not to ‘raise taxes on working people’, nor increase national insurance, income tax or VAT.

While Labor insists this only covers national insurance for workers, not employers, critics say working people would still be hit by lower wages and lower job prospects. “I can’t think of a single tax that doesn’t impact people who work,” said IFS director Paul Johnson.

Xiaowei Xu, senior research economist at the IFS, added: “If the government implements a combination of an increase in the minimum wage, an increase in national insurance for employers and the Workers’ Rights Act, companies could respond by boosting employment to reduce.’

Labor announced last week that its employment rights package – including flexible working, paternity and sick leave from day one – will cost companies up to £5 billion a year.

Ministers last night announced a 6.7 per cent increase in the minimum wage to £12.21 per hour, with a 16.3 per cent increase for under-21s to £10 per hour, leaving businesses with even higher costs confronted. And the rise in national insurance is expected to be one of the key revenue boosters.

Alexandra Hall-Chen, employment expert at the Institute of Directors, said: ‘Each of these factors will have a significant impact on business costs.

“All in all, this is something of a perfect storm for businesses and will pose a significant barrier to hiring for employers.

We urge the government to consider the combined impact of these policies and adhere to its pro-growth, pro-business mission.”

Kate Shoesmith of the Recruitment and Employment Confederation said: ‘Businesses have raised concerns with us and the government about their ability to continue operating if their cost base increases further materially in the short term.’

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