One of Britain's most influential business organisations has urged Chancellor John Healey to cut taxes for employers at the Budget in order to "solve" the crisis facing Neets — young people not in employment, education or training.

In a report published on Tuesday, the Confederation of British Industry (CBI) described Britain's youth unemployment crisis as the "symptom of a wider cost of doing business problem", with more than a million young people currently classed as Neet.

The lobby group called on Healey to cut employers' national insurance contributions (NICs), urging the government to use the period before the Autumn Budget to design the reduction "for maximum impact".

It suggested that the Chancellor could extend a NICs exemption to workers under the age of 25, although the report acknowledged that such a policy would be "unlikely to have a material impact on hiring". The CBI also proposed that Healey cut the headline NICs rate from 15 per cent to 14 per cent.

Researchers declined to say how the proposed tax cut for employers would be funded. However, the group admitted that a reduction of about one per cent to the 15 per cent NICs rate imposed on employers would cost up to £9.8bn, while raising the salary threshold at which firms begin to pay the tax by £1,000 would cost about £3.9bn.

"Young people have a tremendous amount to offer, yet too many are locked out of the labour market," Rain Newton Smith, chief executive of the CBI, said. "The same challenges that are holding back growth are hurting young people and their ability to enter the labour market. For it to work, growth must be at the heart of the youth employment strategy."

NICs and regulation hamper employers

Surveys conducted by the CBI have revealed businesses' frustration with the tax burden after former Chancellor Rachel Reeves' 2024 Budget increased costs for firms across the private sector.

The youth unemployment rate has risen under Labour to above 16 per cent. An independent review of Neets by former health secretary Alan Milburn found that the crisis costs the UK economy about £125bn a year, as benefits spending on young people outpaces expenditure on employment and training.

According to the report, higher NICs, increases to the national living wage, new costs relating to the Employment Rights Act, and wider pressures from energy bills and borrowing are hampering recruiters. The CBI said firms were having to manage cost pressures when planning an expansion of headcount, leaving fewer entry-level roles for school and college leavers.

The report also made a series of demands on workers' rights following the entry into force of the Employment Rights Act. Industry representatives called for a 52-week reference period for guaranteed hours contracts under the Act, and a "low hours" threshold of no more than eight hours a week, in order to ease the risk of fewer job opportunities being offered.

The Treasury has been approached for comment.

Source: City AM