Rachel Reeves is said to have rebuffed a call from M&S chief Stuart Machin for the planned increase in employers’ National Insurance to be phased in gradually.
The Chancellor has stonewalled his call for companies to be given “breathing space” before the £25bn tax hike for employers is fully implemented, The Telegraph has reported.
It comes after Machin accused Reeves of raiding retailers “like a piggy bank” as the sector faces tax rises, wage increases and recycling levies.
Writing a column in The Sunday Times earlier this month, Machin acknowledged Reeves had an “extremely precarious” balancing act to perform, but warned her budget risked stifling future growth by burdening the retail sector with extra costs.
“The blunt truth is, left how it is, the budget means UK retail will get smaller,” he wrote. “The sector already pays an effective tax rate of 55% and the Chancellor’s budget will add £7bn of extra employment costs and an increased packaging levy to a sector working on margins of 3%-5%.”
Machin called for Reeves to compromise in four ways: by phasing the timing of the NI contribution threshold decrease over two years; delaying the increase in extended producer responsibility fees and pausing Defra circularity recycling schemes; rethinking business rates; and ensuring Defra works “with the sector and not against it”.
Under changes announced by Reeves in the budget in October, the threshold at which companies pay National Insurance on employees’ wages will lower in April from £9,100 a year to £5,000 a year, while the rate will rise from 13.8% to 15%.
Companies lobbying against the move are understood to have been told by Treasury officials that no change will be made to the tax plan.
Machin last month warned that extra costs heaped on M&S by the budget would affect the retailer’s approach to recruitment. “And therefore, if I was to give any advice to the government, it would be that we would love to see a growth plan for the country and a growth plan on how to help business,” he said.
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