Some of the UK’s biggest retailers and hospitality businesses, including Tesco, Costa Coffee and the Co-op, have met John Healey to urge him to cut the cost of employing young people in his first budget. At the No 11 event on Tuesday morning, the chancellor heard from sector leaders – including the boss of Marks & Spencer, Stuart Machin, and Sainsbury’s chief executive, Simon Roberts – about the impact of the rise in employers’ national insurance contributions (Nics). Businesses want a partial reversal of the surprise move by Healey’s predecessor, Rachel Reeves, to lower the earnings threshold at which they start to pay Nics from £9,100 to £5,000 a year.
They argue the change contributed to the plunge in the number of high street jobs for young people and part-time workers and a rise in youth unemployment. They want the Nics threshold raised to £6,000, arguing this would help create jobs and ease inflation pressures on high streets. Retail and hospitality firms also hope Healey will ease the burden of business rates, and one source close to the meeting said they were optimistic on both fronts.
Healey has vowed to ease the cost of doing business amid mounting pressures on firms from rising energy bills. Another attender, Helen Dickinson, the chief executive of the British Retail Consortium trade body which represents most big retailers, said: “Retail is a major driver of growth, supporting jobs, investment and communities across the country, and providing vital first jobs and career opportunities for young people. His first budget is the chance to turn that ambition into action by easing costs, making tax fairer and unlocking investment.” Meanwhile it was reported that Healey has rejected calls from Labour MPs and thinktanks to use the budget to equalise the rates at which capital gains and income from work are taxed.
He has come under pressure to increase the rates of capital gains tax (CGT), which is levied on the sale of assets – including second homes and shares – at significantly lower rates than wages. In her first budget in 2024, Reeves increased the rate of CGT from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers. That compares with a 20% basic rate of income tax, a 40% higher rate and 45% additional rate for top earners.
Economists have suggested an equalisation of the rates could raise £11.3bn a year for the exchequer. However, according to the Financial Times, Healey has dismissed such calls because of fears it could deter inward investment, but may yet opt for a smaller increase in CGT short of equalisation. It comes after senior Labour figures floated CGT increases among options to repair the government finances while funding priorities ranging from public services, support for households and long-term infrastructure projects.
The defence secretary, Wes Streeting, suggested the idea of equalisation during his ill-fated May pitch to be the party leader as a “wealth tax that works”. And the first secretary, Louise Haigh, a close ally of Andy Burnham, argued in an article in the journal Renewal in May – while on the backbenches before her return to cabinet – that CGT rates should be “brought closer to income tax rates”. A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events rather than routinely commenting on rumour, speculation or proposals.”
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