Reeves eyes pension reforms in bid to ‘unlock billions’
Rachel Reeves is expected to unveil pension reforms this week, which are intended to channel money into infrastructure and private businesses.
The UK Chancellor is also expected to use her first Mansion House speech in the City of London to “spell out the next phase” of Labour’s plan in Government, after her key pledge in October’s Budget to “fix the foundations” of the economy.
Her speech on Thursday will come against a backdrop of criticism from the hospitality sector, including signatories to a letter organised by UKHospitality who warned that changes to employers’ national insurance contributions could lead to job losses.
Growth
Launching her pension changes, which Treasury sources have said could unlock billions of pounds for critical infrastructure and businesses, Ms Reeves will pitch “growth brought by unlocking private sector investment, including in our financial services industry, and growth brought about by reform – both of our economy and of our public services”.
The Chancellor is also expected to highlight “the untapped potential we have here in Britain, the opportunities available that can be realised, the partnerships that can be forged, the wealth that can be created” as “the prize on offer”.
This could include partnerships with economies in Europe, the Middle East, Asia and the US, the PA news agency understands.
At last month’s Budget, Ms Reeves unveiled a change to the amount employers pay in national insurance contributions (NICs), expected to raise more than £25 billion for the Treasury.
As well as an increase in the rate employers pay from 13.8% to 15%, the threshold at which employers start paying the tax will be reduced from £9,100 per year to £5,000.
Unsustainable
But in a letter on Sunday, 14 UKHospitality board members and a further 209 businesses, including JD Wetherspoon, IHG Hotels and Resorts and restaurant chain Tortilla, have warned that “changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
They continued: “Unquestionably they will lead to business closures and job losses within a year.
“The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.
“There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more.
“Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.”
The letter read: “We know you are determined to ensure that growth is available to all.
“Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.”
They have suggested Ms Reeves rolls out a new NICs band between the new £5,000 and old £9,100 thresholds – with a lower 5% rate – or an exemption for lower band taxpayers who work fewer than 20 hours per week, to support workers in part-time and lower paid roles.
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I can’t say that I have a whole lot of sympathy with employers, but I feel that this new government has completely lost the plot before they have even started. Thus far they’ve managed to make a complete shambles of things and are continuing to alienate the very people they should be courting. Virtually abolishing the Winter Fuel Payment clearly hasn’t gone down well, and will haunt the government for a long time. Refusing to abolish the Two Child Cap on Universal Credit is another mistep that will give succour and support to Reform UK come the 2026 Senedd elections,… Read more »
A very informative piece of writing well done Sir. Only one thing did they have a plot to begin with
Ms Reeves is becoming more clueless with each passing day. To her credit she was able for a while to give a good passing impersonation of an authoritative credible politician but her last 2 weeks have caused the mask to slip and she is rapidly heading downhill almost as quickly as the infamous Truss albeit for different reasons.
It makes you wonder how they get into politics in the beginning or why for that matter, as you say she becomes more clueless by the day why do we have to put up with this none of them seem to have a clue
Yes, we would all like to see the rich paying more tax but unfortunately the extra cost to them would inevitably trickle down to the working person. Most rich people run businesses and if the government taxed them more they would increase the prices of whatever they sell and thus pass on the extra cost to the customer. It’s always a no win situation for us. The rich will never suffer and Rachel Reeves knows this and hopes the gullible masses will not work it out. As a ploy to help out the Chancellor the rich and employers will pretend… Read more »
I know where £4 of the £20 billion has come from. Oh yes. Denying Wales its right to its HS2 consequential stolen by the English Conservatives. And seeing Chancellor of the Exchequer Rachel Reeves is panicking after Donald Trump’s recent election as American president where he’s threatened 10% tariffs on Welsh & British goods entering the US will end up looking down the sofas at no 10 to make up shortfall. Basically we are screwed!
All who have a private pension that you are contributing to need to be aware of these proposed changes, public sector pension liabilities run to over £3.5tn with present and future tax payers on the hook for that already.
Reeves cannot guarantee the same for private pensions she has already raided in budget by IHT changes that do not affect public sector pensions.
It is your future she is playing with, which could materially effect the returns your pension fund can provide for you in future retirement, more likely creating a widening gap between public and private pensions.