The British Chambers of Commerce (BCC) has urged the UK government to reduce employer national insurance contributions (NICs) for all workers under 25 in the upcoming budget, arguing the move would help combat youth unemployment and boost economic growth. Currently, employees under 21 are exempt from NICs, but the BCC proposes extending this exemption to those up to 25 years old, a change estimated to cost the treasury £5.1 billion.

BCC Director General Shevaun Haviland emphasized that lowering NICs for young workers would encourage businesses to hire, thereby reducing youth reliance on welfare and stabilizing future national insurance revenues. The BCC’s budget submission cites Resolution Foundation analysis suggesting the measure could reduce the proportion of young people not in education, employment, or training by 0.5%, potentially halving related government costs over time.

However, the BCC also acknowledged that other policy measures might be more cost-effective, highlighting a government-commissioned review that found the current NICs relief for under-21s has had limited impact. Haviland noted that rising minimum wages have narrowed the cost gap between inexperienced workers and those with some experience, diminishing incentives for employers to hire younger staff.

The call for NICs reform is part of a broader BCC agenda ahead of Prime Minister Rishi Sunak’s forthcoming speech on business costs, which includes demands for reforming business rates and assistance with energy expenses. The BCC criticized the government for delays in promised business rates changes and emphasized the ongoing burden of rising costs on companies.

Despite these calls, economic pressures may limit the government’s fiscal flexibility. Chancellor Jeremy Hunt faces soaring gilt yields, reaching levels not seen since the 2008 financial crisis, constraining available resources with an estimated fiscal buffer of just £13 billion. Some analysts, such as former economic adviser Jim O’Neill, have suggested that addressing entrenched spending commitments in areas like pensions or welfare could calm bond markets, though political consensus on such measures is uncertain.

Haviland reflected on past political challenges faced by business, citing the previous Labour government’s reluctance to address welfare spending as a factor that alienated the private sector. Nevertheless, she acknowledged that Shadow Chancellor John Healey has received some credit for advocating devolution plans aligned with longstanding BCC priorities.

In addition to the cost challenges, Haviland highlighted concerns over the recent wave of foreign takeovers of UK companies. She recounted incidents where British firms, including one producing graphene chips in Cambridgeshire, have been aggressively courted by US entities offering attractive tax incentives to relocate operations abroad.

Both Haviland and BCC President Andy Haldane stressed the need to increase investment capital for scaling domestic businesses. They pointed to potential solutions such as encouraging pension funds to invest more in UK equities and accelerating disbursements through public finance institutions (PuFins) like the National Wealth Fund and British Business Bank. While progress is being made, Haviland said these bodies could move funds more rapidly to support business growth.

Healey has previously emphasized maximizing public investment within the government’s fiscal framework, but with limited room for substantial tax cuts, his upcoming budget may instead focus on facilitating greater use of public financial institutions to stimulate private sector expansion.