EXCL – Sunak should lower national insurance in 2023, argues jobs chief
With inflation having reached a 40-year high this year and the economy predicted to shrink in 2023, City PM zooms in on the volatile, hyperactive UK jobs market by checking in with Paul Farrer, the CEO and founder of London-based recruitment giant Aspire.
Sitting down with this paper today, Farrer calls on the new Prime Minister, Rishi Sunak, to bring “certainty, stability and confidence” to the UK jobs market by addressing a number of key concerns urgently.
Firstly, he urges Sunak to “rethink the burden that is employers’ national insurance.”
“Scrapping the recent rise in Employers’ National Insurance – one of the few tax cuts to survive the reversal of the mini-Budget – was the right thing to do,” Farrer said.
But he said it doesn’t go far enough, particularly as businesses prepare for the possibility of a recession.
“The Government has to raise revenue to plug the hole in our finances, but taxing companies that hire employees is, in my view, counterproductive.”
Paul Farrer
Farrer elaborated: “The UK needs as many people employed and paying Income Tax as possible.
“If we enter recession and employers are forced to cut costs and make redundancies, then the Exchequer loses National Insurance payments from the employer, the employee and Income Tax,” he explained.
“Clearly, you can’t scrap this tax but the balance that encourages employment and retaining staff must be found,” he added.
Employment laws
Furthermore, Farrer said the new government should address the complex regulatory framework of employment laws.
“Workers absolutely need and deserve protection from exploitation and employment rights – I’m not suggesting otherwise,” he stressed.
However, Farrer pointed out the long-awaited Employment Bill, which despite being promised in 2019, is yet to land.
So the government should “accelerate” its publication, it is “key in giving employers confidence and clarity when it comes to hiring,” he said.
“This government has an opportunity to de-risk employment law, which is fraught with complexities and ambiguity and is a barrier to employment.”
Paul Farrer
Moreover, Farrer said the government should “reconsider” IR35 reform repeal to “unleash” flexibility of the labour market
“One of the UK labour market’s greatest assets is its flexibility, which has been impacted by the introduction of the off-payroll working rules.”
Ex-Chancellor Kwasi Kwarteng “was right” in promising to repeal IR35 reform only for his replacement, Jeremy Hunt, to U-turn, he noted.
“IR35 itself, as a concept, is understandable, but many businesses have become reluctant to engage freelancers and contractors due to the complexity of this legislation and for fear of being hit with large fines from HMRC.”
Farrer argued that “in times of economic uncertainty, flexible workers hold the key to helping employers navigate peaks and troughs in demand.”
“IR35, in its current form, is stopping businesses – and in turn, the economy, from reaping the benefits of an agile, flexible workforce.”
Paul Farrer
He is convinced that repealing IR35 reform would “unleash the true flexibility” of the labour market.
Finally, Sunak should do more to support small businesses, as Farrer calls them “the backbone of the economy.”
“Traditionally, the Conservative Party has been the party for small businesses – which at last count, accounted for almost the entire private sector,” he noted.
“What’s more, these small enterprises employ most people working in the private sector. These businesses are the backbone of the economy and need targeted support now, perhaps more than ever.”
As a successful entrepreneur, the new Chancellor Jeremy Hunt, should understand this more than most and business rates reform, for instance, should be under consideration,” Farrer concluded.