
How Rachel Reeves killed the private sector pay rise
Pay growth has flatlined as employers brace for Rachel Reeves's £25bn National Insurance raid, a leading jobs analyst has warned.
Figures from Employment Hero show that average pay growth in small and medium businesses collapsed to 0pc in the first three months following the Chancellor's October Budget.
The company said that employees were 'feeling the squeeze' as businesses sacrificed pay rises to prepare for Labour's 'jobs tax' from April.
Experts have already warned that Ms Reeves's changes have threatened national security, raised council tax and dragged 750,000 workers into National Insurance.
Employment Hero analysed real-time data from 90,000 workers in businesses with up to 500 workers. Its data shows that average pay for full time workers jumped by 1.1pc in the three months leading up to October last year.
However, this fell to 0pc in the three months to January following the Chancellor's sweeping changes to employer National Insurance contributions in her maiden Budget.
In the same period the previous year, average pay grew by 0.8pc.
Meanwhile, public sector workers will benefit from an above-inflation pay hike of at least 2.8pc from April after Ms Reeves approved proposals last year.
Currently, employers only pay National Insurance contributions when an employee earns more than £9,100, but Ms Reeves has decided this will fall to £5,000 from April 6. The rate payable will also increase from 13.8pc of salaries to 15pc.
Kevin Fitzgerald, of Employment Hero, said: 'Small and medium businesses are under increasing pressure as the looming jobs tax forces them to be cautious with wage bills.
'Rather than increasing pay, many are having to set aside funds to cover rising employment costs. While lower interest rates may offer some relief to overall business expenses, they don't necessarily translate to higher wages for staff.
'International research on jobs taxes makes one thing clear – it's workers who ultimately feel the squeeze.'
In November, consultants Barnett Waddingham warned that the changes could cost workers up to £2,000 a year in retirement.
The following month, a survey carried out by the Bank's Decision Maker Panel showed that more than half of businesses also expected to raise prices and cut jobs.
Employment Hero also said that growth in full-time employment had been 'weak' since the Budget.
It reported that while January saw a slight seasonal increase of 1.4pc, it followed falls of 1.7pc in November and 0.2pc in December.
Jeff Moody, of the British Independent Retailers Association, which represents small firms, said the figures painted a 'concerning picture' for small businesses.
He said: 'Stagnant wage growth among firms with fewer than 500 employees, coupled with unstable employment patterns, suggests that the Chancellor's National Insurance changes aren't delivering the boost that was promised.
'While we saw a modest seasonal uplift in employment of 1.4pc, this barely scratches the surface after previous months' losses.
'Our independent retailers are caught in a perfect storm – they want to reward their hard-working staff but are increasingly struggling to do so in the current climate.'
A HM Treasury spokesman said: 'For 14 years, politicians accepted a UK economy that failed working people, we won't. That's why at the Budget we protected people's payslips from higher taxes, froze fuel duty and increased the national living wage making three million people £1,400 a year better off from April.
'Official data shows that real pay growth increased to its highest rate in three years in the three months to November and in our Plan For Change we have been clear that we will go further and faster to kickstart economic growth so working people have more money in their pockets.'
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BBC News
7 minutes ago
- BBC News
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The Sun
10 minutes ago
- The Sun
Buy-now-pay-later Reeves is bribing voters with baubles as Labour's debt clock racks up and up
GOODBYE the Iron Chancellor, hello the Klarna Chancellor. Rachel Reeves' spending splurge yesterday may have some eye-catching purchases. But it's buy now, pay later as Labour racked up the debt even further. 3 You could hear Nigel Farage breathing down the neck of her Spending Review that saw the Treasury shovel billions out of the door on the never never. Clearly designed to see cranes in the sky and spades in the (electoral battle) ground, Reeves stuck another £113billion on the borrowing tab to try to see off the threat of Reform in the next crucial three years ahead of the election. There was £39billion for affordable homes and another £14billion for the first nuclear power station to be built in a generation. The £7billion prison-building project should be welcomed, as long as the judges actually fill them with violent thugs rather than online mums publishing stupid tweets. Bribe and cajole But voters will be wary of the £16billion in transport upgrades outside of the South East — what you might call levelling up — having heard these promises before, only to see them paused, scrapped and delayed again and again. And let's hope none of the above projects over-run on their budget — like pretty much every other major government infrastructure initiative has in the past 40 years. I couldn't help thinking Reeves' speech yesterday was the most she had ever sounded like Gordon Brown, torturing a dreary mantra that these were 'Labour choices' as she sought to bribe and cajole voters with baubles while the debt clock racked up and up. But we all know what happened to Brown when the music stopped . . . While the bond markets were steady last night after Donald Trump struck a trade deal with China, these things can go south very quickly, so it's far from clear if this spending gamble will pay off for Reeves. As former Cabinet Secretary Simon Case told The Sun this week: 'The nation's credit card is maxed out.' Top 5 takeaways from Spending review He warned: 'Just like when you're at home and you've got your credit card or your mortgage, you have to pay for that debt. 'So the debt interest that we're paying on the nation's credit card, if you actually put it out like it was a government department, it would be one of the biggest government departments by spending. 'It's taking up huge amounts of our money.' The Institute for Fiscal Studies put the extra borrowing Reeves has undertaken since taking over at No11 at £140billion, with more than £105billion of taxpayers' cash alone this year going on interest payments. To tackle this, Case directly urged Reeves this week to 'put the squeeze' on public spending or face a debt crisis and a lack of confidence in the UK's financial system with horrific effects. 3 So were there any cuts, or restraint of any real note yesterday? Of course there was the obligatory three per cent rise in NHS spending over the next three years as more pound notes poured into that seemingly indeterminable black hole. While NHS chiefs were crowing yesterday that they had 'done well' out of the settlement, they were already pumping out mood music that it might not be enough. Yet by 2029, the NHS annual budget will be just short of a quarter of a trillion pounds a year at £226billion. When will it ever be enough? And where are the promised reforms to the system that would rid us of this endless gimme, gimme, gimme cycle? Also, £9billon in efficiency savings for the NHS were proposed yesterday, with scarce details on the how, but already experts are pouring cold water on even that small sum being hit. Labour promised to get a grip on the NHS, and warned that more money would not be the answer. Another election promise that has turned to dust. As has Labour's pledge to end the use of migrant hotels within 12 months of taking power. That has now been downgraded to 'by the end of this Parliament' — at a cost of nearly £5billion until then. Smoke and mirrors Even by 2029, the Government will still be spending more than £2billion a year accommodating visitors, just not in hotels. So behind the smoke and mirrors of Reeves' speech to MPs, that isn't really a cut. And the continued costs of the heaving asylum bill dwarfs any of the departmental savings unveiled yesterday. Reeves was keen to stress no return to the days of austerity, and her tinkering on Whitehall budgets was about the only part of her speech yesterday that matched her rhetoric. The £1.5billion to be shaved off total departmental spending in the next three years pales in comparison to her extra spending elsewhere. Just over £14billion being spent this year, down to £12.6billion in three years' time. Hardly putting on the squeeze. GDP at 2.7trillion . . . Let's hope the Chancellor doesn't need a major rainy day fund anytime soon, or she really will be the new Gordon Brown.


Sky News
25 minutes ago
- Sky News
Chancellor Rachel Reeves pledges 'largest settlement since devolution' for Scotland
The chancellor has pledged the "largest settlement in real terms since devolution" for Scotland as part of the UK government's spending review. Rachel Reeves promised £52bn for Scotland as she unveiled a raft of investments for north of the border, including increased spending on defence, development funding for a carbon capture project, and money to reboot plans for the UK's most powerful supercomputer. The Scottish government will receive an average block grant of £50.9bn per year between 2026-27 and 2028-29. Ms Reeves told MPs: "This spending review provides the largest settlement in real terms since devolution was introduced." 1:19 The UK government said the money will allow the Scottish government to be able to "spend more on its priorities such as funding NHS Scotland, education, transport and welfare". However, Scotland's finance secretary Shona Robison said it "fails to deliver" and has "short-changed" the nation by more than a billion pounds, as she warned spending levels for public services will "fail to offset the impact of proposed cuts to welfare support and the rise in national insurance contributions". Ms Reeves announced a £250m investment for HM Naval Base (HMNB) Clyde. The Royal Navy base - commonly known as Faslane - houses the UK's nuclear submarines. The funding, part of the Clyde 2070 programme, will be injected over the next three years. 'Next industrial revolution' The chancellor also pledged development funding for the Acorn carbon capture project in Aberdeenshire in a bid to aid "Scotland's transition from oil and gas to low carbon technology". However, it is yet to be confirmed how much money will be allocated to the project - which will store carbon emissions from across Scotland under the North Sea. Aberdeen-headquartered Great British Energy and Great British Energy - Nuclear will invest more than £8.3bn over the parliament in homegrown clean power, alongside establishing a new government campus for energy. Ms Reeves stated: "These are investments to make sure the towns and cities which powered the last industrial revolution will play their part in our next industrial revolution to reduce our reliance on overseas oil and gas and protect working families from price shocks." Scotland will also receive £452m over four years to continue the delivery of City and Growth Deals across the nation. In addition, the Scottish capital will also become home to the UK's most powerful supercomputer. 2:58 Ms Reeves had earlier revealed up to a further £750m would be allocated to the University of Edinburgh project. The funding reinstates a scheme that was scrapped last year by Labour as it had not been funded by the outgoing Conservative government. It is hoped the cash injection will "kickstart economic growth" and is part of efforts to strengthen "Britain's position as an AI-maker and research power". The supercomputer will aid scientists in cutting-edge research, whether that's personalised medical treatments, sustainable air travel, or modelling climate change. The government said the new supercomputer will "vastly exceed" the capacity of the UK's current national supercomputer, ARCHER2. The Brand Scotland programme will receive £2.25m between 2026-2029 to continue promoting the nation's investment opportunities and its globally celebrated products around the world. 'Game-changing' review Scottish Labour leader Anas Sarwar praised the spending review as "game-changing", adding: "The plans set out today will bring billions of pounds of investment to Scotland, on top of the record budget settlement delivered in the budget. "From the Acorn Project to a national supercomputer in Edinburgh to our defence industry, this Labour government is investing in Scotland's future while the SNP carps from the sidelines." Ms Reeves had earlier this week announced a partial U-turn in the cut to the universal winter fuel payment. The payment, worth up to £300, will be restored to pensioners in England and Wales with an income of less than £35,000 a year. In Scotland, ministers had previously revealed plans to ensure all pensioners north of the border receive a payment in 2025/26. Under the Scottish government's proposals, those in receipt of pension credit or other benefits will receive a £200 or £300 payment, depending on their age. All other pensioners will receive a reduced payment of £100. The change in policy from the UK government will bring additional money to Holyrood. The Scottish government has not ruled out making changes to its planned scheme, but First Minister John Swinney said his ministers were "trying to understand the fiscal implications" of Westminster's decision. Settlement 'particularly disappointing' Finance secretary Ms Robison said: "Today's settlement for Scotland is particularly disappointing, with real terms growth of 0.8% a year for our overall block grant, which is lower than the average for UK departments. "Had our resource funding for day-to-day priorities grown in line with the UK government's overall spending, we would have £1.1bn more to spend on our priorities over the next three years. In effect, Scotland has been short-changed by more than a billion pounds. "This all comes on top of the UK government's failure to fully fund their employer national insurance increase, depriving us of hundreds of millions of pounds in funding, and their proposed cuts in support for disabled people that will push 250,000 people into poverty, including 50,000 children." Ms Robison also said that "despite apparent briefing to media in advance", the Scottish government was still "awaiting clarity" on funding for the Acorn carbon capture project. The finance secretary added: "We made extensive representations to the UK government on our priorities for the spending review, including calls for an end to spending that bypasses devolution, but there has been limited opportunity to engage with them. "It appears that the continuation of local growth funding - which fails to match the European structural funds it was supposed to replace - will come directly from Whitehall, yet again bypassing devolved governments. "We will now take the time to digest the detail of this statement and will set out our formal response on 25 June as part of the medium-term financial strategy."