The Confederation of British Industry (CBI) has called for a CBI employer NICs cut ahead of the Autumn Budget, arguing that the current tax burden on businesses is directly fuelling Britain’s youth unemployment crisis, with more than a million young people now classed as Neet, not in employment, education or training. The lobby group published a report on Tuesday setting out a package of tax and regulatory changes it wants Chancellor John Healey to adopt.
The CBI’s central proposal is to reduce the headline employer national insurance contributions (NICs) rate from 15 per cent to 14 per cent. The group also suggested extending a NICs exemption to workers under the age of 25, though its own report acknowledged that such a policy would be ‘unlikely to have a material impact on hiring’ in isolation. The CBI urged Healey to use the period before the Budget to design any reduction ‘for maximum impact’.
The group’s researchers declined to set out how the cuts would be funded. However, the report acknowledged that reducing the employer NICs rate by around one percentage point would cost up to £9.8 billion, while raising the salary threshold at which firms begin to pay the tax by £1,000 would cost about £3.9 billion.
NICs rise and its toll on hiring
The scale of the ask needs to be understood against recent changes to the levy. According to UK Parliament, the rate of secondary Class 1 NICs rose from 13.8 per cent to 15 per cent from 6 April 2025, part of the package announced in Rachel Reeves’s October 2024 Budget. The CBI’s own surveys have captured the response: businesses have been vocal about the additional cost burden the increase imposed across the private sector.
The consequences for headcount decisions have been pronounced. According to the government’s GOV.UK interim report on young people and work, more than 30 per cent of employers said they expected to operate with fewer staff as a result of the NIC changes and threshold adjustments announced in that Budget. The same report included analysis by the Centre for Policy Studies suggesting the annual cost of hiring a young person had risen by around £4,000 as a result of those changes.
It is against this backdrop that the Neet figures have deteriorated. By the end of 2024, the Neet rate had risen to 13.2 per cent, its highest level for a decade, according to the interim report. The youth unemployment rate has since climbed above 16 per cent under Labour.
CBI employer NICs cut tied to wider reform agenda
Rain Newton-Smith, the chief executive of the CBI, framed the issue as an intersection of the growth agenda and youth opportunity. ‘Young people have a tremendous amount to offer, yet too many are locked out of the labour market,’ she said. ‘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.’
The CBI’s report drew on an independent review of the Neet crisis by Alan Milburn, the former health secretary, which found the problem costs the UK economy about £125 billion a year, as benefits spending on young people outpaces what is spent on employment and training. Higher NICs, increases to the national living wage, new obligations arising from the Employment Rights Act and pressures from energy bills and borrowing costs were all identified as factors hampering recruiters.
Fewer entry-level positions for school and college leavers are among the practical consequences, the CBI argued, as firms weigh cost pressures against any planned expansion of headcount.
Beyond the NICs ask, the CBI made a series of demands relating to how the Employment Rights Act operates in practice. Industry representatives called for a 52-week reference period for guaranteed hours contracts and a ‘low hours’ threshold of no more than eight hours a week. The objective, the group said, is to reduce the risk that new employment obligations result in fewer job opportunities being offered to young workers.
The Treasury has been approached for comment. The Autumn Budget is when Healey will face the first formal test of whether the government’s youth employment strategy can accommodate the CBI‘s demand for a CBI employer NICs cut alongside its wider fiscal commitments.
