Martin Lewis Raises Questions Over Rachel Reeves’ First Labour Budget
Following the historic first Labour budget delivered by Chancellor Rachel Reeves, renowned personal finance expert Martin Lewis has posed a significant query regarding the funding sources for her decisions. In her budget statement on October 30th, Reeves outlined major changes to National Insurance (NI) for employers, which will come into effect from April 2025. Businesses will now be required to pay 15% NI per employee, up from the current rate of 13.8%. Reeves emphasised that this adjustment would impact those “with the broadest shoulders”. However, Lewis is now questioning how businesses will cope with the anticipated average £615 per employee increase in costs.
Taking to X, formerly known as Twitter, Lewis highlighted the impact of the new threshold, where employers will now begin paying NI from £5,000 instead of £9,100. At the new 15% rate, this amounts to a significant £615 rise in costs per employee per year. Lewis prompts the important question of where these additional funds will originate, whether from profits, raised charges, or reduced salaries/benefits. He also noted that the Employers Allowance for NI has been raised from £5,000 to £10,500 annually, thereby exempting small businesses from this cost increase.
Lewis had previously expressed concerns about the budget’s repercussions, particularly emphasising the necessity for measures to support pensioners following the decision to eliminate the winter fuel payment. Describing this budget as one of the most stringent in recent memory, Lewis highlighted reforms in crucial areas such as carer’s allowance, energy bills, tax-free childcare, child benefit, and especially the winter fuel payment. Speaking to The Times, Lewis indicated that some of his proposed measures were partially acknowledged in the budget announcement. He emphasized the importance of designing a fair system within consumer finance that operates effectively and benefits all parties.
As the nation awaits further details and implementations of Reeves’ budget, Lewis’s questioning sheds light on the practical implications of these financial adjustments. With scrutiny placed on how businesses will navigate the increased NI contributions and the broader economic impact on various sectors, the dialogue sparked by Lewis’s enquiries contributes to a deeper understanding of the challenges and considerations at play in the aftermath of this landmark budget presentation.