The Confederation of British Industry has called on Chancellor John Healey to cut employer taxes ahead of the Autumn Budget to address Britain’s worsening youth unemployment crisis.
In a report published Tuesday, the CBI described the Neets crisis as the “symptom of a wider cost of doing business problem”, with more than a million young people currently not in employment, education or training.
The powerful lobby group wants Healey to reduce employers’ national insurance contributions and use the pre-Budget period to design the reduction “for maximum impact”.
One proposal suggests extending a NICs exemption to workers under the age of 25, though the CBI acknowledged such a policy would be “unlikely to have a material impact on hiring”.
The report also recommends cutting the headline employer NICs rate from its current 15 per cent down to 14 per cent.
Researchers declined to specify how any proposed employer tax cut would be funded, leaving questions around fiscal responsibility unanswered.
The CBI acknowledged that cutting the NICs rate by approximately one percentage point would cost up to £9.8bn, while raising the salary threshold by £1,000 would cost around £3.9bn.
Rain Newton-Smith, the chief executive of the CBI, said: “Young people have a tremendous amount to offer, yet too many are locked out of the labour market.”
Newton-Smith added: “The same challenges that are holding back growth are hurting young people and their ability to enter the labour market. For it to work, growth must be at the heart of the youth employment strategy.”
Britain’s youth unemployment rate has climbed under Labour to above 16 per cent, compounding pressure on the government to act decisively on the issue.
An independent review on Neets conducted by former health secretary Alan Milburn found the crisis costs the UK economy approximately £125bn annually, as benefits spending outpaces investment in employment and training.
Former Chancellor Rachel Reeves’ 2024 Budget increased NICs costs significantly for private sector firms, and CBI surveys have since revealed widespread business frustration with the growing tax burden.
Higher NICs, national living wage increases, new obligations under the Employment Rights Act, rising energy bills, and borrowing pressures are all hampering recruiters, according to the report.
The CBI warned that firms facing these mounting cost pressures are scaling back headcount expansion plans, resulting in fewer entry-level roles available to school and college leavers.
Industry representatives also called for a 52-week reference period for guaranteed hours contracts under the Employment Rights Act, alongside a “low hours” threshold of no more than eight hours per week to protect job availability.
The Treasury has been approached for comment.