CBI urges Chancellor to cut employer taxes to boost youth hiring

The Confederation of British Industry has called on Chancellor John Healey to reduce employer taxes at the upcoming Budget, arguing that such measures are essential to address the crisis facing young people not in education, employment or training. In a report published on Tuesday, the business lobby group described the current state of youth unemployment as a symptom of broader issues regarding the cost of doing business in the United Kingdom. With more than one million young people currently classified as Neets, the CBI believes that targeted fiscal interventions are required to unlock potential in the labour market.

The group specifically recommended that the Chancellor use the period leading up to the Autumn Budget to design a reduction in national insurance contributions for maximum impact. While the CBI suggested extending the existing NICs exemption to workers under the age of 25, it acknowledged that this specific policy change was unlikely to have a material impact on hiring decisions. Instead, the report proposed cutting the headline NICs rate from 15 per cent to 14 per cent. Researchers associated with the group declined to specify how such a tax cut would be funded, but they provided estimates of the potential cost. A reduction of approximately one per cent to the current rate would cost up to 9.8 billion pounds, while raising the salary threshold where firms begin to pay the tax by 1,000 pounds would cost around 3.9 billion pounds.

Rain Newton Smith, chief executive of the CBI, stated that young people have a tremendous amount to offer yet remain locked out of the labour market. She emphasised that the same challenges holding back growth are hurting young people’s ability to enter work, asserting that growth must be central to any youth employment strategy. The report highlighted that businesses are frustrated with the tax burden following the 2024 Budget, which increased costs for the private sector. The youth unemployment rate has risen above 16 per cent under the current government, with an independent review by Alan Milburn estimating the crisis costs the economy 125 billion pounds annually.

The CBI noted that higher NICs, increases to the national living wage, and new costs related to the Employment Rights Act are hampering recruiters. These pressures are leading firms to plan headcount expansions more cautiously, resulting in fewer entry-level roles for school and college leavers. The report also included demands regarding workers’ rights, calling for a 52-week reference period for guaranteed hours contracts and a low hours threshold of no more than eight hours a week to mitigate the risk of reduced job opportunities. The Treasury has been approached for comment on these recommendations.