Several of the United Kingdom’s leading retailers and hospitality companies have urged Chancellor John Healey to reduce the cost of employing young workers in his upcoming budget. Representatives from major firms, including Tesco, Costa Coffee, the Co-op, Marks & Spencer, and Sainsbury’s, met with Healey at 11 Downing Street to discuss concerns over recent increases in employers’ National Insurance contributions (NICs).

The business leaders expressed frustration over a policy introduced by Healey’s predecessor, Rachel Reeves, which lowered the NICs threshold from £9,100 to £5,000. This adjustment means employers begin paying NICs on wages above £5,000 annually, a change that retail and hospitality groups say has contributed to a sharp decline in job opportunities for young people and part-time workers, as well as rising youth unemployment. The firms are advocating for an increase in the NICs threshold to £6,000, arguing that such a move would stimulate job creation and help ease inflationary pressures affecting the high street.

In addition to urging reforms on NICs, the sector also hopes for relief from the burden of business rates. Sources close to the meeting described the discussions as positive, noting that Healey appeared receptive to their concerns and the need to support growth amid mounting cost pressures.

Helen Dickinson, chief executive of the British Retail Consortium, highlighted the significance of retail to the UK economy, emphasizing its role in supporting jobs, investment, and communities nationwide. She cautioned that the cumulative effect of increased taxes and operational costs could ultimately be passed on to consumers, potentially hindering retailers’ ability to create employment opportunities. “The chancellor recognized these pressures, and we had a positive discussion about our shared ambition for growth and tackling youth unemployment,” Dickinson said.

Separately, Healey has reportedly rejected calls from some Labour MPs and policy think tanks to align capital gains tax (CGT) rates with those for income tax. CGT, which applies to the sale of assets such as shares and second homes, currently has lower rates than income tax. In the 2024 budget, Reeves raised CGT rates from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers, still below the income tax rates of 20%, 40%, and 45% that apply to earned income depending on the bracket.

While economists have suggested that equalizing CGT with income tax could generate approximately £11.3 billion annually for the Treasury, Healey is said to be cautious about doing so, concerned that such a move might discourage inward investment. Reports indicate he may consider a more modest increase without full equalization.

The discussion on CGT aligns with internal Labour debates over strategies to improve government finances and fund public spending. Defence Secretary Wes Streeting previously described CGT equalization as a “wealth tax that works” during his leadership campaign, while Louise Haigh, first secretary and an ally of Andy Burnham, promoted closer alignment of the two tax rates in a journal article earlier this year.

A Treasury spokesperson declined to comment directly on the ongoing speculation, reiterating that tax decisions are reserved for formal fiscal events.