Business lobby groups ‘failed to avert national insurance rise’

Britain’s big five business lobby groups have been accused of being “far too cosy” with the government and of “failing to deliver” after the increase in companies’ national insurance contributions in the budget.
Steve Morley, president of a group that represents about 200 manufacturers, said the credibility of the major business groups, including the CBI and the British Chambers of Commerce, had been damaged by October’s “ill-thought out budget”.
Since Rachel Reeves’ budget on October 30, a range of businesses and industry groups have warned that measures including a £25 billion increase in employer national insurance contributions would damage their employment and investment plans and undermine profitability.
Now there are suggestions that the UK’s leading business lobby groups, sometimes known as the “B5”, should have pressed the government harder in the run-up to the statement, particularly over the increase in national insurance.
Morley said: “Who is really speaking for small to medium-sized firms [SMEs] in manufacturing? For me it wasn’t only the government’s credibility that was damaged by the budget but that of the B5 lobbying groups.
“Given their direct access to the powers-that-be at Whitehall, the failure to deliver for business left them at best ‘hoodwinked’ and, at worst, looking naive. Would the government have treated the unions in the same way?”
The B5, which also includes the Institute of Directors, the Federation of Small Businesses and Make UK, a manufacturing group, have regular meetings with ministers and officials.
Morley added: “It is far too cosy and needs a shake-up; only then will we see clear support for SMEs, who are the foundation of manufacturing in the UK.”
Morley is president of the Confederation of British Metalforming, which primarily represents the interests of SME UK manufacturers, many of which supply the automotive industry, which has been caught between disappointing sales of electric vehicles and the need to meet lower emissions targets.
He said the “additional burden” that budget measures had created “is another whammy to an already under siege sector”. He added: “All of the optimism following the election, and the promise of an industrial strategy, has been wiped away with the ill thought-out budget.
“Going forward this now begs the question: can we trust Labour with the industrial strategy? It is one thing introducing one, but it’s the content that counts especially for SMEs, who are constantly overlooked.”
In October, the government published a consultation document setting out proposals for an industrial strategy and supporting eight highly productive sectors.
Morley said that the government needed to “make sure that the voice for small and medium-sized manufacturers is heard and integrated into the development of the industrial strategy” when it considers the thousands of detailed responses that are expected to be received.
Craig Beaumont, executive director of the Federation of Small Businesses, said: “FSB led the campaign against [increasing national insurance] and we’re proud to have persuaded the government to shelter the smallest businesses from it. Others that were quiet before the budget and then loud afterwards have some serious questions to answer.”
The CBI, Make UK and the British Chambers of Commerce declined to comment.
Roger Barker, director of policy at the Institute of Directors, said it took “an evidence-based approach” to its engagement with all governments. “We are not afraid to call them out on behalf of our members and the wider business community. We do that in our regular meetings with cabinet ministers, but also openly in the national press. We have been deeply critical of the government’s actions in the budget, which our own data has shown has a material impact on business and therefore will undermine growth.”
Shortly before the chancellor delivered the budget, Rupert Soames, the chairman of the CBI, accused the government of seeing business as a cow to be milked rather than “the strong horse that pulls the whole cart”.
Behind the story: Big businesses could have protested more forcefully before the budget
Many business leaders supported Labour in the run-up to the general election. However, the government’s relationship with industry has been severely tested by Rachel Reeves’s maiden budget in October, particularly the rise in employer national insurance.
Big businesses including Tesco, Next and Marks & Spencer warned that the move will cost jobs, raise prices and lead to shop closures, as have entrepreneurs and small business owners. Industries ranging from care homes to hair salons to hospitality have sounded the alarm.
In the run-up to the budget on October 30, did the “B5” business groups do enough to warn how damaging the well-trailed move would be? Not everyone thinks so. A senior business figure told The Times that MPs and bosses of major employers were among those that expressed surprise and disappointment that more wasn’t done to protest about the plans before the budget.
A fortnight before the budget, asked by the BBC if raising employer national insurance would limit hiring or reduce pay rises or both, Rain Newton-Smith, chief executive of the CBI, said that such a policy “needs to be in the context of a broader strategy around how the government will approach the costs that businesses face in hiring” and a “tax landscape which is competitive”. Hardly the robust warning of wholesale job losses and damaged investment that businesses have expressed in the wake of the budget.
An honourable mention for the Federation of Small Businesses; two weeks before the budget it said that that the policy would “100 per cent” put jobs at risk and damage job creation; that it amounted to a “jobs tax” and “doesn’t make much sense” from a government seeking growth; and that it was a “clear breach” of Labour’s manifesto pledge not to increase taxes on working people. No doubt the other groups also say they did their best to protest in one form or another.
Taken as a whole however, there does seem to have been something of a mismatch between the volubility of the B5’s warnings about the national insurance hike and other budget measures and the fury that has followed from their members, large and small. Organisations that present themselves as the “voice of business’’ find themselves under pressure to speak up.