Budgetary Tax Increases May Elevate Childcare Costs

The Stormont committee has been informed that an increase in employers’ national insurance contributions may lead to higher childcare expenses for parents who are employed. During her Budget presentation, Chancellor Rachel Reeves declared an increase in the employer national insurance contributions rate, moving from 13.8% to 15%. Additionally, she is reducing the threshold at which employers become liable for NI contributions, from £9,100 to £5,000. Roger Pollen, representing the Federation of Small Businesses, conveyed to MLAs that there is a significant risk of numerous businesses “crumple under the burden.” He stated: “Within the children’s daycare sector, typically the increase in employers national insurance alone will mean an extra burden on average of £18,600 on nursery settings.” He further elaborated that this figure “is not taking into account the increase in the national living wage. So you’re talking about almost one full time employee’s additional overhead being loaded onto that sector.” Mr. Pollen indicated that due to the stringent regulation of childcare concerning staff-to-child ratios, businesses in this sector are unable to implement similar adjustments to alleviate the rising costs, leaving them with minimal choice but to transfer these expenses to their clientele. He cited an example: “One other nursery business we spoke with had calculated that across their various units, its going to mean an increase of around £300,000 in national insurance alone, due to the change in the rate and reduction in threshold.” Reeves additionally declared that the employment allowance, which enables companies to decrease their National Insurance liability, will be raised from £5,000 to £10,500. Mr. Pollen commented: “For those business who have around four to six employees, the doubling of the allowance means they come out of slightly better off.” However, he added, “the reduction in the threshold means that a lot of businesses that have part time employees, for whom they didn’t have to pay national insurance, are now having to pay it as they are getting caught in that net.” He concluded this point by stating: “For every employee for whom national insurance has to be paid, that rate has gone up to 15%.” He further noted that these changes diminish the appeal of business expansion. Colin Neill of Hospitality Ulster asserted that the Budget announcements are increasing the wage expenditures for pubs, restaurants, and hotels by thousands of pounds. He stated: “The living wage and the employers national insurance rise would add £25,000 cost to every employee.” He clarified that “That’s based on a 38 hour week worker, on the national living wage.” He concluded by emphasizing: “We can’t pass on the costs, we’re at a price ceiling. We’ve nowhere to go and we can’t pass it on.” He advocated for temporary assistance with rates bills, mirroring the support announced for hospitality businesses in England. Neill explained: “Westminster realised that hospitality was in trouble, along with retail and leisure, and stepped in to give significant relief which manifested as a 75% rates relief in England. “He continued: “Wales followed with 50% using their Barnett consequential. The money came here and went into the baseline budget but the reality is that money would not be there if we weren’t in trouble. The baseline budget would have been lower.” He asserted that Northern Ireland finds itself in a less favorable situation compared to England and Wales “because we got none of that help this last few years.” Retail NI reiterated this appeal for support. Glyn Roberts, chief executive of Retail NI, commented: “I do not think it is unreasonable that the same level of rates relief that small businesses receive in Brighton or Bolton should apply equally in Ballymena or Banbridge or all our towns and cities.” He added: “We’ve heard a lot of people talk about the Irish sea border. It’s very clear that there is now a business rates border in the Irish Sea.” Roberts concluded: “For many of our members this is no longer a ‘cost of doing business crisis’ – this is an emergency.” The Federation of Small Businesses also represents certain farm enterprises that are apprehensive about the effects of modifications to inheritance tax. Roger Pollen recounted: “One person put it to me – if every time you changed the chief executive of Sainsburys, you had to give 20% of the value of Sainsburys to the government, how long would this business last?” He explained that “They were drawing that analogy with farmers where the land is being treated as part of the value of the business, whereas the reality, it’s the business you operate on that land and those two being conflated has been very difficult. “He concluded: “That’s what makes the difference between that and any other family business.”