The bosses of Britain’s top pubs and restaurants have told the chancellor that tax increases in the last month’s budget will “unquestionably” lead to shutters coming down and people losing their jobs.
This month, more than 200 have stated that the hospitality industry cannot support an increase in the amount paid by employers in NICs as this will be unrealistic.
It further notes that ‘most organisations have no capacity to pass the costs onto customers,’ which would result in layoffs and the shut down of small businesses.
Labour’s Chancellor Rachel Reeves has claimed that her National Insurance amendments for companies will raise £25bn to supplement the financing of some public services like the National Health Service.
From April 2012 the rate of NICs paid by employers will increase from 13.8 percent to 15 percent – and the level at which this tax is triggered on the salary of each and every employee will be halved to £5000 per year.
Darren Jones, chief secretary to the Treasury, said in an interview with BBC’s Sunday with Laura Kuenssberg program that the changes were made in such a manner that sought to reduce the extra cost of conducting business among small businesses.
Companies that signed the letter include UKHospitality headed by Kate Nicholls, pub companies Fuller Smith and Turner and Stonegate, and Premier Inn owner Whitbread.
They are backed by a further 209 businesses who collectively provide employment to tens of thousands of employees throughout Great Britain.
Paying more will lead to the deferment of investments due to the increase in cost for businesses, significant loss of jobs, and through layoffs, hours to be significantly reduced for the workers, explains the letter.
According to Jones, the government would not reconsider the plan, and many employers will pay less in NI contribution now or in the future.
“I believe that the public would understand that large companies can afford some of the shares that are required to be made to the state,” he said.
“Putting the NHS back on its feet, so people who need to be off the sick can go back to work would probably be something we would all agree we would like,” he said.
Impact on lower earners
The letter from industry bosses stated that adjustments to NICs threshold are “regressive in effects on lower paid and will affect flexible working pattern which many elder workers and parents depend on”.
The signatories have demanded the government to adopt one of the two actions to “shield businesses which pay low wages” to businesses to lessen on the effects.
Proposed reforms include a new employer NICs band which would levied at 5% for the range £5, 000 – £9,;100 or excemption of taxpayers who work less than 20 hours per week.
The Office for Budget Responsibility (OBR) has estimated that 75 per cent of the blow from NI reforms will be borne by employees as employers cut wages and recruitment in response to increased labour costs.
Prof. David Miles of the OBR told a select committee hearing on Tuesday that it was ‘very plausible’ that such a change would hit workers on lower wages most.The changes outlined in the Budget are, however, expected to bring £25bn year and the reforms can be considered to be one of the largest single tax increase in the history.The chancellor of the exchequer has previously admitted that she was not beyond being criticised on the move averring that it will put the public finances on solid base.
Impact on lower earners
The letter from industry bosses suggests that changes in the NICs threshold are “regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
The signatories are calling for the government to consider one of two measures to “protect businesses who employ low earners” to mitigate the impact.
Suggested measures are a new employer NICs band which would apply between £5,000 and £9,100 at a lower rate of 5%, or implementing an exemption for taxpayers working fewer than 20 hours per week.
The Office for Budget Responsibility (OBR) has calculated that three quarters of the impact of the NI changes will be felt by employees as bosses hold back on pay rises and hiring in the face of higher wage bills.
During a select committee hearing on Tuesday, the OBR’s Prof David Miles said it was “very plausible” this would disproportionately affect lower-paid workers.
The changes set out in the Budget are, however, predicted to raise some £25bn year, making it one of the biggest single tax-raising measures in history.
The chancellor has previously said that she was not immune to “criticism” over the move, but has argued that it will put public finances on “firm footing”.
The letter comes after other large British supermarkets like M&S and Sainsbury’s suggested they could raise their prices to achieve larger margins and cover increased wages costs.Speaking on Thursday, Sainsbury’s chief executive Simon Roberts noted that NI changes would cost the business £140m – something, which does not impute increases to minimum wage.rners
The letter from industry bosses suggests that changes in the NICs threshold are “regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
The signatories are calling for the government to consider one of two measures to “protect businesses who employ low earners” to mitigate the impact.
Suggested measures are a new employer NICs band which would apply between £5,000 and £9,100 at a lower rate of 5%, or implementing an exemption for taxpayers working fewer than 20 hours per week.
The Office for Budget Responsibility (OBR) has calculated that three quarters of the impact of the NI changes will be felt by employees as bosses hold back on pay rises and hiring in the face of higher wage bills.
During a select committee hearing on Tuesday, the OBR’s Prof David Miles said it was “very plausible” this would disproportionately affect lower-paid workers.
The changes set out in the Budget are, however, predicted to raise some £25bn year, making it one of the biggest single tax-raising measures in history.
The chancellor has previously said that she was not immune to “criticism” over the move, but has argued that it will put public finances on “firm footing”.
The hospitality industry’s letter follows on from big British supermarkets such as M&S and Sainsbury’s hinting that they may put up prices in a bid to offset higher wage bills.
Sainsbury’s chief executive Simon Roberts said on Thursday that the NI changes would cost the business around £140m – sum which does not include the increases to minimum wage
The boss of Wetherspoons also said earlier this week that following the Budget, taxes and business costs were “expected to increase by approximately £60m”.
Its chairman said that he believed many hospitality businesses planned to pass costs on to customers.
Referance : BBC.com