Why the government’s NIC hike could turn the UK into a “pay‑to‑the‑bank” circus
Picture this: every time an employer hires someone, the government’s knife shears another slice out of their pot – bumping the National Insurance Contributions (NICs) from 13.8% to 15% this April. While the Treasury boasts an extra £25 billion in the coffers, the reality is a classic case of “pay the price, pay the nature”: jobs get cut, workers go off‑the‑books, and the welfare system is forced to step in like a tired traffic cop.
Businesses Don’t Love Extra Taxes – They Love Survival
- Hiring? Probably not. Firms are already pausing recruitment drives, winding down hours, or literally pulling the plugs on whole departments.
- Operations shrank. From breaking up supply chains to re‑thinking their entire business model – the cost of doing business is rising with the nail‑bending numbers from energy, wages, and red‑tape.
- More risky moves. Companies will hand out “cash‑only” payouts to sidestep NICs. Think of it as a spin‑off into the underground – you lose tax revenue and your employees lose the safety net of benefits, pensions, and formal employment rights.
The “Cash‑in‑Hand” Conundrum
Whenever employment costs climb higher, businesses look for an escape route – off‑the‑book wages. That snow‑balls into a black‑market workforce, job insecurity for the workers, and a sudden drop in legitimate tax streams. It’s a double whammy: the Treasury gathers less, and the people’s pockets get emptier.
Why the Assumption is Flawed
Govt. thinks companies will just absorb the extra money and carry on as normal. Reality? An extra worker cut equals a dial‑down in corporate tax, VAT, and business rates. When firms shrink, less spending and investment follow – meaning the economy starts to feel like a flat‑iron: thinner, emptier, and less vibrant.
Let’s Rethink
Instead of hounding employers, the policy could give them a boost: subsidies, tax incentives, or flexible labour‑cost models that encourage growth. Happy firms create jobs, attract investments, and naturally pump more tax revenue into the public coffers.
Rachel Reeves may believe she’s patching a budget hole, but she’s actually widening the dent. This move hurts business owners, workers, the Treasury, and ultimately, the whole of Britain.
