Labour conference business lobbying is heading into a wall of unwelcome arithmetic, with the Chancellor facing a fiscal picture that analysts at Capital Economics last week described as ‘dismal’ and that almost certainly demands tax rises rather than the cuts most industry groups are seeking.
Hundreds of submissions have reached the Treasury in recent months: from academics, retailers, farmers, horse racers and, yes, Britain’s canal operators. Some have been ambitious. A group of City investors, apparently resigned to the worst, urged the Chancellor simply to ‘do no harm’. All of them will meet a harder reality at next week’s conference.
Fiscal headroom and the lobbying reckoning
The pressure on public finances is not subtle. The Chancellor’s fiscal headroom has been cut from £23.6bn to below £10bn, leaving little room for the giveaways business groups are seeking. The IMF and the OECD have both called for an immediate tightening in fiscal policy. Andy Burnham has said Britain is ‘over exposed’ to bond markets. Treasury officials, weary of submissions that ignore trade-offs, have their own term for the phenomenon: one person on the Treasury’s payroll recently joked, ‘Ah, cakeism! It’s our job to defeat that.’
The most influential lobbyists secure ’round tables’ with senior Cabinet ministers. The Confederation of British Industry has tried to unite the private sector’s demands into a coherent list. It offered the Chancellor a set of options for reducing employers’ national insurance contributions: cutting the headline rate by one percentage point would cost just under £10bn, while raising the salary threshold from £5,000 would cost around £3.9bn.
The British Chambers of Commerce has gone further, calling for the triple lock pension to be scrapped, the mechanism that has allowed the state pension to outpace workers’ wage growth over several years. Accountants have called for greater clarity on fiscal rules. Everyone, it seems, has a view.
Higher market interest rates are already weighing on private sector borrowing costs. Bank of England officials agreed in mid-September that elevated rates are helping to suppress demand across the economy. Fiscal consolidation under current plans is loaded towards the back end of the three-year forecast, which gives little immediate comfort to businesses facing rising costs now.
Labour conference business lobbying and the NEET question
One area where business groups see genuine common ground with the government is youth employment. Burnham has pledged to move young people off benefits and into work, and firms have been quick to attach their Budget submissions to that ambition. They are waiting on the Alan Milburn review into NEETs, young people under 25 who are not in employment, education or training.
The scale of the problem gives those submissions some weight. According to the Resolution Foundation, the NEET rate among 18-to-24-year-olds climbed from 13 per cent in 2019 to 15 per cent in 2025, equivalent to almost 900,000 young people. Reporting by The Guardian on the Milburn review puts the annual cost of that youth jobs crisis at £125bn for Britain, with an individual who was NEET in early adulthood standing to lose an average of £52,000 for every year spent outside work or study over the course of their working life.
The GOV.UK interim report on young people and work adds another layer: in 2024/25, 29.6 per cent of disabled young people were NEET compared with 8.7 per cent of non-disabled peers, a gap of 20.9 percentage points. Businesses arguing they can help address inactivity among young people are pointing at a real and evidenced problem, and that gives their case more traction than the more self-interested submissions on tax.
National insurance receipts tell a different story
The government’s own numbers complicate the case for unwinding the business tax raid announced under Rachel Reeves. Between the financial years 2024-25 and 2025-26, income from national insurance contributions jumped by £33bn. Receipts are projected by the Office for Budget Responsibility to rise to £245.8bn by 2031. The Treasury has, for now, received the cash it was after.
The cost to employment has been less tidy. The OBR predicted unemployment would peak at 4.3 per cent before falling back to four per cent. It currently stands at 4.9 per cent, with that 0.9 percentage point gap equivalent to roughly 320,000 more people out of work than the watchdog anticipated, a misjudgment that has sharpened the frustration of retail and business groups pressing for relief on employers’ national insurance.
The British Retail Consortium and the BCC want the Chancellor to partially reverse the business tax measures from Reeves’ first budget, arguing that doing so would lower labour costs and encourage firms to hire less experienced workers. It is a case that carries logic, but logic and fiscal room are not the same thing.
Labour’s Business Day on Monday will test whether the government’s stated desire to ‘partner’ with employers amounts to more than conference-season language. With the OBR’s interim forecast due ahead of the Budget, businesses will have a clearer picture of exactly how much fiscal space does not exist.
