The short version
- Yorkshire employers are pressing Chancellor John Healey to reduce National Insurance contributions for workers under 25 during his upcoming budget presentation.
- Business leaders cite ongoing financial strain from previous tax hikes and a post-pandemic slump in hospitality, arguing that current fiscal policies hinder hiring and growth.
- Educators seek greater flexibility in funding structures, including VAT rebates for colleges, to better support young people entering the workforce or seeking upskilling opportunities.
Business leaders across Yorkshire are intensifying their appeals to Chancellor John Healey as he prepares to deliver his first budget on October 28. The primary request from employers in the region is a reduction in National Insurance contributions specifically for employees under the age of 25. This proposal comes amid growing concerns about a youth unemployment crisis, with local chambers of commerce arguing that targeted tax relief could stimulate hiring among younger demographics who have been disproportionately affected by economic stagnation.
The West and North Yorkshire Chamber of Commerce, representing approximately 5,000 employers in the area, has framed this potential cut as a critical tool for addressing labor market imbalances. They contend that lowering the cost of employing young people would directly tackle the issue of individuals not engaged in education, employment, or training. This perspective is shared by Aqila Choudhry, managing director of Love in Care, a Leeds-based care home provider, who emphasized that businesses are still feeling the impact of unexpected tax increases implemented in 2024.
Choudhry noted that the hospitality and care sectors have faced rising operational costs over the past decade, a trend exacerbated by recent fiscal changes. She described the 2024 National Insurance hike as a shock to the system, stating that many businesses are still struggling to absorb the financial burden. Her organization and others in the region are calling for no further tax increases, arguing that relief is necessary for companies to survive, sustain operations, and eventually expand their workforce.
In the hospitality sector, the challenges appear even more acute. Martin Greenhow, who operates bars in Harrogate, Leeds, and Sheffield, reported that his business has been recovering slowly since the pandemic. He highlighted a significant shift in consumer behavior, noting that Friday night revenues remain 30% below pre-pandemic levels due to changes in social habits and remote work trends. Greenhow attributed some job losses directly to the increased employer National Insurance contributions, describing them as a bitter pill that forced difficult staffing decisions.
Greenhow also pointed to broader economic pressures affecting consumer spending power. He argued that adjusting income tax thresholds could leave more money in customers' pockets, thereby supporting retail and hospitality businesses. Additionally, he called for reductions in business rates and VAT for the hospitality sector, suggesting that such measures would help prevent closures and encourage investment. His stance reflects a wider sentiment among small business owners who feel squeezed by both high operational costs and reduced consumer demand.
Beyond immediate tax relief, educators are seeking structural changes to funding models. Ken Murray, principal of York College, advocated for allowing further education colleges to claim rebates on Value Added Tax. Currently, sixth-form colleges providing free education to students aged 16 to 18 cannot access these rebates, creating a disparity with academies and free schools. Murray argued that this financial disadvantage limits the ability of colleges to invest in programs that help young people transition into high-quality jobs.
Murray also highlighted inefficiencies in current funding allocations for unemployed individuals seeking training. He noted that uptake for free courses designed to support job seekers is low, while there is a lack of flexibility to fund upskilling for those already employed. By allowing more freedom in how ring-fenced money is spent, colleges could better address the needs of working adults looking to improve their skills, thereby enhancing overall employability in the region.
Chancellor Healey faces significant constraints in responding to these demands. Labour’s 2024 manifesto pledged not to increase income tax, National Insurance, or VAT, limiting the options available for raising revenue. In a September speech, Healey outlined his mission to drive growth through devolution, public leadership, and investment rather than traditional tax hikes. However, he has acknowledged that government borrowing costs are at historic highs, leaving open the possibility of other fiscal adjustments. The upcoming budget will reveal whether the chancellor can balance these competing pressures while addressing the specific concerns raised by Yorkshire businesses and educators.
The tension between fiscal responsibility and economic stimulus remains central to the debate. While the government aims to promote growth across all postcodes, local stakeholders argue that targeted interventions are necessary to address regional disparities and sector-specific challenges. The outcome of the October budget will likely set the tone for future economic policy, particularly regarding how the government supports young workers and small businesses in a constrained fiscal environment.
Sources behind this briefing
Go to the original reporting
- BBC Business↗Calls to cut employer National Insurance contributions for under-25s
