Retailers press chancellor to lower youth employment costs in budget

Major UK retailers and hospitality operators have urged the chancellor to reduce the financial burden of employing young people ahead of his first budget. The group, which includes Tesco, Costa Coffee and the Co-op, met with John Healey to discuss the impact of recent changes to employers’ national insurance contributions. They are seeking a partial reversal of a policy introduced by his predecessor, Rachel Reeves, which lowered the earnings threshold for these contributions from £9,100 to £5,000 a year. The businesses argue that this shift has contributed to a decline in high street jobs for young people and part-time workers, while simultaneously driving up youth unemployment. Their primary request is to raise the threshold to £6,000, a move they believe would facilitate job creation and alleviate inflationary pressures on the high street.

The meeting, held at No 11 on Tuesday morning, featured senior executives from across the sector. Stuart Machin, the boss of Marks and Spencer, and Simon Roberts, chief executive of Sainsbury’s, were among those who addressed the chancellor regarding the rise in employers’ national insurance contributions. Helen Dickinson, chief executive of the British Retail Consortium, which represents most large retailers, emphasised the sector’s role in supporting growth, investment and communities. She noted that the industry provides vital first jobs and career opportunities for young people. However, she warned that after a 20 per cent increase in retailer taxes over two years, including an additional £6.5bn in new employment costs, any further financial burdens would likely be passed on to consumers at the till. This, she argued, would make it more difficult for retailers to create jobs. Dickinson stated that the chancellor acknowledged these pressures and that the discussion was positive regarding shared ambitions for growth and tackling youth unemployment. She described the upcoming budget as a chance to turn that ambition into action by easing costs, making tax fairer and unlocking investment.

In addition to national insurance, retail and hospitality firms are hoping Healey will ease the burden of business rates. One source close to the meeting indicated that attendees were optimistic on both fronts, noting that it felt like the chancellor was listening. Healey has previously vowed to ease the cost of doing business amid mounting pressures from rising energy bills. The meeting comes as the government faces pressure to repair public finances while funding priorities such as public services, household support and long-term infrastructure projects. Senior Labour figures have floated various options, including increases in capital gains tax, to address the fiscal gap. The defence secretary, Wes Streeting, suggested the idea of equalising capital gains and income tax rates during his May pitch for party leadership, describing it as a wealth tax that works. Similarly, Louise Haigh, the first secretary, argued in a May article that capital gains tax rates should be brought closer to income tax rates. However, reports indicate Healey has rejected calls to fully equalise these rates, citing fears it could deter inward investment. He may yet opt for a smaller increase in capital gains tax, short of full equalisation, to balance fiscal needs with economic growth. A Treasury spokesperson stated that decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour or speculation.