Employers' national insurance rise ‘straw that breaks camels back', Lords told
A rise in employer national insurance could be the 'straw that breaks the camel's back' for businesses, a former head of the spending watchdog has said.
Crossbench peer Lord Morse, former head of the National Audit Office, warned that 'not all big businesses have equally broad shoulders' as he said the Government had not considered the 'differential damage' of the move.
Chancellor Rachel Reeves announced a hike to employer national insurance contributions (NIC) in the autumn budget, with the aim of raising around £25 billion a year.
Lord Morse told peers: 'Employer national insurance has no direct relationship to that employer's profitability, and thus to that employer's ability to pay more tax.
'If an employer happens to be in an industry that habitually has payroll costs of a relatively high proportion of its total expenditure, it will necessarily attract a higher cost from the increase in employer national insurance, that if it had that same turnover and spent a lower percentage of its outgoing costs on payroll, but, for example, a higher amount on technology, data and other non-labour costs.
'If a business has a very substantial turnover, but relatively low margins, such as a lot of the major construction contractors…that its ability to pay more national insurance may be much less than it would be in another more profitable sector.
'Not all big businesses have equally broad shoulders. I know that's a popular government expression, and some big businesses may find the additional NIC charge very much more damaging than others. It may even be the final straw that breaks the camel's back, in some cases.
'Different industries form larger or smaller proportions of economic activity in different areas of the UK, and they tend to be concentrated.
'If a high proportion of local business activity happens to be in a high payroll model of business this means that the local economy is likely to be disproportionately impacted, and we are hearing examples of that in Northern Ireland, but it's not just there.
'It's not rocket science. I'm saying I must admit, but I'm not sure that HM Government has considered these points of differential damage, if not, they should do so.'
The Government's plans are detrimental in many ways, but not least the reality that many businesses will be simply unable to absorb the increased cost of national insurance contributions or the inflation-busting wage increases, but the bill still has to be paid
Lord Morrow
The debate on Monday evening was called by DUP peer Lord Morrow who said the Government had not given thought to the 'disproportionately negative impact' removal of agricultural property relief and increases to employer national insurance would have on Northern Ireland.
He told peers: 'The Government's plans are detrimental in many ways, but not least the reality that many businesses will be simply unable to absorb the increased cost of national insurance contributions or the inflation-busting wage increases, but the bill still has to be paid, and this will be shifted onto the consumer, who will have to contend with higher prices amidst an extremely difficult time for many families across Northern Ireland.
'In Northern Ireland, the rise in the rate of national insurance contributions from 13.8% to 15% will hit our agricultural sector hard.'
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