Bosses hit out at Labour policies which make it harder to hire staff

Labour was hit by a fresh backlash from business leaders on Tuesday in a new blow to ministers as they launched a drive to get more people back into work.

Industry chiefs told a Parliamentary committee they were suffering a 'triple whammy' from both Angela Rayner's workers' rights revolution and Rachel Reeves' tax raid.

Employers' groups and MPs also warned that the impact of the Budget risked undermining the new Get Britain Working white paper, which aims to tackle joblessness and reduce the spiralling benefits bill.

And a senior figure at the Bank of England admitted that the increase to employers' National Insurance contributions would put companies off hiring more staff.

It came just a day after Chancellor Rachel Reeves attempted to quell a growing revolt against the £40billion tax raid in her maiden Budget a month ago by promising 'I'm not coming back with more borrowing or more taxes'.

In a more than five-hour hearing of the Employment Rights Bill Committee, industry chiefs warned that measures contained in Ms Rayner's workers' rights overhaul, coupled with the Budget changes, would make it riskier for a business to take someone on.

Alex Hall-Chen, principal policy advisor at Institute of Directors (IoD), told MPs: 'A key fear for us is the cumulative impact of all the 28 reforms in this Bill, coupled with everything else happening in the employment space so far, and that taken as a whole the measures make hiring someone riskier and more expensive for businesses.

'Our research has shown that as a result businesses will hire fewer people.'

At the Budget, Ms Reeves launched a £25billion raid on employers' National Insurance contributions (NICs) and hiked the national living wage by 6.7per cent.

Following the committee, British Chambers of Commerce director general Shevaun Haviland criticised the 'scale and scope of the changes' in the Bill.

'The Budget has already left many firms feeling bruised, and if this legislation is enacted as it stands, it could hamper growth, restrict recruitment and lead to job losses,' she said.

Business groups also warned that young people would be 'disproportionately' affected, as a result of the changes to national insurance, the living wage and workers' rights.

Matthew Percival, future of work director at the Confederation of British Industry (CBI), told MPs that the impact of the changes would be 'concentrated in sectors which currently employ a large number of young people'.

'The Bill also ends up focusing on the same area, and those businesses often speak about a 'triple whammy' because they are also the same businesses that are affected by the national living wage increases.

'So in all three aspects, you end up with a similar group of businesses who are particularly facing costs and therefore, where there are unintended consequences, they are disproportionately likely to be faced by young people.'

However, union leaders welcomed the changes in the Bill, with RMT general secretary Mick Lynch saying it could increase collective bargaining while TUC leader Paul Nowak said it would likely increase unionisation.

Shadow business secretary Andrew Griffith said Labour's 'union paymasters are licking their lips at the prospect of these measures becoming the law'.

'They will hand massive powers to the unions, making it easier for them to hold organisations and their consumers to ransom and take us back to the 1970s.'

In a separate Parliamentary hearing, Bank of England chief economist Huw Pill told the Lords economic affairs committee that the NI hike was a 'disincentive to employment'.

'We do recognise that an increase in national insurance contributions widens the wedge between the producer wage - the wage paid by firms - and the consumer wage - the wage received by wage earners.

'And that is a disincentive to employment at some level. That probably is weighing at the margin against participation in the labour market.'

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Meanwhile Work and Pensions Secretary Liz Kendall published a white paper which she said represented the 'biggest reforms to employment support in a generation'.

She said the toll of 2.8million people out of work because of long-term sickness and almost 1million young people not in education, employment or training had created an economic and 'social crisis' as well as a welfare bill expected to rise by £26billion within five years.

But she was warned in the Commons that her plans - including an overhaul of Jobcentres and more NHS appointments in worklessness hotspots - risked being defeated if bosses cannot afford new staff as a result of the Budget.

Ms Kendall was told by her Tory counterpart Helen Whately that while she 'tries to get people into work, her Chancellor is busy destroying jobs'.

'If the Secretary of State wants to get more 18-year-olds into work, she should have a word with her Chancellor, who has made it so that from April it will cost £5,000 more for a business to employ them.'

Liberal Democrat MP Christine Jardine said: 'Many of us see a contradiction in this policy and the National Insurance changes, because a major employer in my constituency of Edinburgh West tells me it's going to cost them a quarter of a million pounds extra a year, and they won't be taking on seasonal workers because they can't afford it.'

Business groups made the same point with the CBI's Matthew Percival saying: 'Employers have a key role to play in supporting the delivery of the government's objectives. There's no doubt that rising taxes and employment costs will make it more difficult for them to do so.

'That's why it's so important business and government work together to join the dots across the policy landscape in order for policy intent to translate into long-term impact.'

Prof Len Shackleton of the IEA think-tank said: 'It is a disappointing package, unlikely to stimulate the inactive back into work.

'It is questionable that there would be enough jobs for them in any case, given that the budget and minimum wage increases have sharply raised the cost of employing people, especially the young, while new employment rights from Day One mean that employers face greater risk in taking on those without a sound employment record.'

The white paper also raised the threat of fresh 'sin taxes' on unhealthy food as part of efforts to get people off sickness benefits.

It stated: 'The Government is committed to reducing the number of people becoming overweight and obese and wants to work with the sector to consider all levers to further encourage food and drink reformulation to help tackle obesity, in a way that protects consumers and with a focus on voluntary and regulatory measures.'