Raising employer NI ‘not consistent’ with Labour manifesto and could lead to ‘fewer jobs’
Hiking employer national insurance (NI) “doesn’t look consistent” with Labour’s manifesto and could lead to job losses in the long term, the head of an influential thinktank said.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), told Sky News’ Politics Hub With Sophy Ridge that employer NI ultimately “comes from the pay of the employee” and increasing it could result in “less pay rises” and “possibly fewer jobs”.
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Sir Keir Starmer has refused to rule out raising national insurance for employers in the upcoming autumn budget.
Some have suggested this would break a 2024 manifesto pledge which said Labour will not increase national insurance, income tax or VAT.
The prime minister claimed on Tuesday that it was clear this meant not “increasing tax on working people” – leaving the door open for the employer element of NI to go up.
Paul Johnson of the IFS
But Mr Johnson said: “I think if we got a straightforward increase in the rate of employer national insurance, that certainly doesn’t look consistent with a very clear statement in the Labour manifesto: ‘We will not raise national insurance contributions’.
“It does not specify employee national insurance contributions.”
Companies pay NI at a rate of 13.8% on all employees’ earnings above £175 per week, but pension contributions made by employers are currently exempt from the levy. This is what experts suggest could be targeted.
Separately, employees and the self-employed pay NI on their earnings, which comes off their payslip.
Ministers have insisted this element will not go up when Chancellor Rachel Reeves delivers her budget later this month, in which she will lay out measures to fill a £22bn “black hole” in the nation’s finances.
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However, Mr Johnson suggested that the impact of any increase to employer NI would ultimately fall on the worker.
“The sort of economic theory tells you that’s what’s likely to happen and the empirical evidence is that that’s what does happen, that if you increase that in the longer term, it results in less in the way of pay rises,” he said.
He added: “In the end, all taxes are paid by people.
“They have to be either paid by the shareholders of the firms that are paying it or the customers or the employees.
“Most of the theory and the evidence suggests that most of the increase will be felt by employees in lower wages, probably, but possibly in the longer term, fewer jobs than there otherwise would have been. I mean, this is very, very similar in the long term to an increase in employee national insurance contributions.”
‘Jobs tax bad for the economy’
Mr Johnson’s view was shared by Craig Beaumont, the executive director of the Federation of Small Business.
He called employer NI a “jobs tax” and said if anything it should be reduced rather than raised.
“If you increase it you would see fewer jobs,” he told Sky News.
“The small business looking at that will go well, what do I do now?
“Do I cut costs? Do I increase my prices? Do I reduce jobs? Reduce hours? Do I look at the pension contributions? Every single option from that is a bad one for the economy.”
United States Senator Cynthia Lummis suggests the crypto industry may be celebrating too soon over the US Federal Reserve softening its crypto guidance for banks.
“The Fed withdrawing crypto guidance is just noise, not real progress,” Lummis said in an April 25 X post. Lummis called the Fed’s April 24 announcement — withdrawing its 2022 supervisory letter that had discouraged banks from engaging with crypto and stablecoin activities — “just lip service.”
Lummis’ tone was different from the rest of the crypto industry
Lummis, a pro-crypto advocate known for introducing the Bitcoin (BTC) Strategic Reserve Bill in July 2024, pointed out several flaws in the Fed’s announcement, even as Strategy founder Michael Saylor and crypto entrepreneur Anthony Pompliano suggested it was a step forward for banks and crypto.
She argued that the Fed continues to “illegally flout the law on master accounts” and still relies on reputational risk in its bank supervision practices. It comes as the Federal Insurance Deposit Corporation (FDIC) is working on a rule to stop examiners from considering reputational risk when reviewing a bank’s operations, according to a recent Bloomberg report.
Lummis also highlighted the Fed’s policy statement in Section 9(13), which hasn’t been withdrawn, stating that Bitcoin and digital assets are considered “unsafe and unsound.”
She also reiterated many of the same staff behind Operation Chokepoint 2.0 are still involved in crypto policy today.
“We are NOT fooled. The Fed assassinated companies within the industry and hurt American interests by stifling innovation and shuttering businesses. This fight is far from over.”
“I will continue to hold the Fed accountable until the digital asset industry gets more than a life jacket, Chair Powell — they need a fair shake,” Lummis said.
Related: If Trump fired Powell, what would happen to crypto?
Custodia Bank founder and CEO Caitlin Long seemed to share a similar view to Lummis.
“THANK YOU for seeing this for what it is,” Long said.
However, many crypto executives praised the Fed’s announcement as a positive development for the industry. Saylor said in an April 25 X post that the Fed’s move means that “banks are now free to begin supporting Bitcoin.”
Anastasija Plotnikova, co-founder and CEO of blockchain regulatory firm Fideum, said the Fed’s decision “is a significant development, as it will simplify the path to institutional adoption.”
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In one of his first appearances as the recently sworn-in chair of the US Securities and Exchange Commission, Paul Atkins delivered remarks to the agency’s third roundtable discussion of crypto regulation.
In the “Know Your Custodian” roundtable event on April 25, Atkins said he expected “huge benefits” from blockchain technology through efficiency, risk mitigation, transparency, and cutting costs. He reiterated that among his goals at the SEC would be to facilitate “clear regulatory rules of the road” for digital assets, hinting that the agency under former chair Gary Gensler had contributed to market and regulatory uncertainty.
“I look forward to engaging with market participants and working with colleagues in President Trump’s administration and Congress to establish a rational fit-for-purpose framework for crypto assets,” said Atkins.
Some critics of US President Donald Trump see Atkins’ nomination to lead the SEC as a nod to the crypto industry, acting on campaign promises to remove Gensler — the former chair resigned the day Trump took office — and cut back on regulation. Democratic lawmakers on the Senate Banking Committee questioned Atkins on his ties to the industry, potentially presenting conflicts of interest in his role regulating crypto.
Related: Atkins SEC era sparks massive industry optimism, crypto execs speak out
The direction of the SEC under new leadership
“We’ve noticed that we don’t have to be as concerned […] about being accused of things that we’re not doing, like being broker-dealers for securities,” Exodus chief legal officer Veronica McGregor, who participated in the roundtable, told Cointelegraph on April 24.”It’s just a less scary regulatory environment in general. It is, however, still unclear what the ultimate regs are going to look like for crypto.”
The SEC crypto task force is scheduled to hold two more roundtables in May and June to discuss tokenization and decentralized finance, respectively. Commissioner Hester Peirce, who leads the task force, told Cointelegraph in March that she welcomed the opportunity to work with Atkins to “reorient the agency,” hinting at an SEC with regulations more favorable to the crypto industry.
In addition to the roundtables, the crypto task force has reported several meetings with digital asset firms to discuss various policies and considerations in developing a regulatory framework.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
Nasdaq has urged the US Securities and Exchange Commission (SEC) to hold digital assets to the same regulatory standards as securities if they constitute “stocks by any other name,” according to an April 25 comment letter.
The exchange said the US financial regulator needs to establish a clearer taxonomy for cryptocurrencies, including categorizing a portion of digital assets as “financial securities.” Those tokens, Nasdaq argued, should continue to be regulated “as they are regulated today regardless of tokenized form.”
“Whether it takes the form of a paper share, a digital share, or a token, an instrument’s underlying nature remains the same and it should be traded and regulated in the same ways,” the letter said.
It also proposed categorizing a portion of cryptocurrencies as “digital asset investment contracts,” to be subject to “light touch regulation” but still overseen by the SEC.
Related: Certain stablecoins aren’t securities, SEC says in new guidance
Regulatory U-turn
The SEC has dramatically pivoted its stance on cryptocurrency oversight since US President Donald Trump took office in January.
Under the leadership of former Chair Gary Gensler, the SEC took the position that practically all cryptocurrencies, with the exception of Bitcoin (BTC), represent investment contracts and therefore qualify as securities.
This stance led the agency to bring upwards of 100 lawsuits against crypto firms for alleged securities law violations.
However, under Trump nominee Paul Atkins, who was sworn in as chair on April 21 after a lengthy Senate confirmation, the SEC has claimed jurisdiction over a narrower segment of cryptocurrencies.
In February, the agency issued guidance stating that memecoins — if clearly identified as purely speculative assets with no intrinsic value — do not qualify as investment contracts pursuant to US law.
In April, the SEC said that stablecoins — digital tokens pegged to the US dollar — similarly do not qualify as securities if they are marketed solely as a means of making payments.
Integrating crypto into TradFi
In its April 21 letter, Nasdaq said existing financial infrastructure “can readily absorb digital assets by establishing the proper taxonomy and calibrating certain rules to reflect what is truly new and novel about digital assets.”
The Depository Trust & Clearing Corporation (DTCC) — a private US securities clearinghouse closely overseen by the SEC — has been laying the foundation for integrating blockchain technology into regulated financial markets.
In March, the DTCC committed to promoting Ethereum’s ERC-3643 standard for permissioned securities tokens.
Magazine: Ethereum is destroying the competition in the $16.1T TradFi tokenization race
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