Who could have foreseen that raising the cost of employing people would lead to a rise in unemployment?

Well, me, for starters, in this very column shortly after the 2024 Budget. Also, the Confederation of British Industry warned that the Budget’s measures “make hiring more expensive, and restrict the capacity to offer pay rises”. And a wide range of other people, including economists, businesses and the Opposition.

In other words, pretty much everybody saw it coming except Rachel Reeves. As I wrote at the time: “Most of the time, politicians proudly acknowledge the impact that raising taxes has on the activity being taxed. When they raise taxes on tobacco, they do so in expectation that it will reduce smoking. When they raise taxes on pollutants, they do so because the higher cost will deter pollution. What, then, do they expect will happen when they raise taxes on hiring people?”

By raising national insurance, pushing up the youth minimum wage and creating new employment regulatory costs, all at a time of minimal growth, hard-pressed businesses were forced to hire few people.

Unemployment is hugely damaging at any age, and all the more so among the young. There are now almost a million NEETs (not in education, employment or training) aged 16-24, and youth unemployment is up to 16.1 per cent (both for the three months to December........

© iNews