Tax hikes will ruin efforts to boost business investment and end the productivity crisis
A spokesperson for the Treasury said “the government is committed to supporting the economy, businesses and investment,” calling the super-deduction announced in March “the biggest reduction in activity in two years of modern history, encouraging business investment “.
Hiring is also threatened. Currently, the economy is generating jobs quickly – the Office for National Statistics found more than one million vacancies in July, a record – but the rising cost of paying staff through national employers’ insurance more high threatens to slow the madness.
The Center for Economics and Business Research estimates that a typical company with 50 employees would pay between £ 10,000 and £ 20,000 in additional NICs per year, which is close to the salary of a junior worker.
If this resulted in a quarter of small businesses deciding not to hire a new staff member, job creation would be reduced by around 350,000, the consulting firm warned.
The Federation of Small Businesses estimates the shortfall at 50,000 jobs, smaller but still important.
“The government’s regressive employment tax hike will put jobs at risk, stifle start-ups and prevent the creation of new jobs,” said Mike Cherry, national chairman of the group.
“Combined with other rising wage costs – and companies having to make tough decisions about the future of those who have been supported by the job retention program – that figure of 50,000 could easily be much higher. . “
He leaves the Bank of England with a complicated balancing act.
If higher hiring rates force companies to pass costs on to their customers, this could lead to higher inflation and thus increase the pressure to raise interest rates.
Still, a drop in hiring could mean the central bank would have to wait longer before tightening monetary policy, allowing lower interest rates to fuel a more comprehensive recovery.
Jacob Nell, an economist at Morgan Stanley, warns that taxes are “a risk to wage growth and consumption”, potentially slowing the economy enough for the Bank of England to slow rate hikes.
He expects the base rate to drop from 0.1 percent to 0.25 percent next year, only half of the increase expected by markets, which were forecasting a hike to 0.4. percent before the announcement of national insurance.