The cost of employing people on low wages has just rocketed. Few employers should begrudge paying a higher minimum wage but the cost of paying 15% as an employment tax on earnings between £5,000 and £9,100 is £615. This is not money that goes to those on low wages, it it money that is paying for Government spending. True there is a 1.2% increase in employment tax for the higher paid but for employers, that £615 diminishes the higher the pay , the IFS is right, employing a lot of low paid workers is not cost-effective; the gig-economy has had a boost and with it, a loss of employment rights for those who join it. Self-employment is no fun if you don’t choose it.

There are of course ways for richer staff to work with employers to reduce the impact of NI – salary sacrifice for instance, but the low-paid have no such luxury. Their alternatives are gig employment, unemployment or austerity in terms of pay rises. Talks of hospitality companies putting 7op on a pint to keep workers’ pay rises seem fanciful to me.

This is the unfortunate consequence of promising that there would be no further rises in income tax. The Government has scrupulously observed this manifesto promise even down to not extending the freeze on tax thresholds.  But to make this promise, they have had to turn to their employment tax (national insurance) which has lost its hypothecation.

It may be better to return the hypothecation and make it clear that national insurance is a tax to pay for health and pensions. Thankfully we still have a functioning NHS , free for all at the point of use, we have an increasingly relevant state pension and we have a means tested benefit system that is becoming increasingly well understood (well done Martin Lewis on his show last night).

The financial services sector has little right to stand on its soapbox on this. In my area- pensions – I have been waiting a decade to see a penny paid to the 1.7m workers who have had too much collected from their salaries via pension auto-enrolment because pension companies could not or would not switch their systems to provide incentives to save at source. That most occupational schemes are still running net pay payrolls shows how little regard their is to the consequences of that system to those who pay pension contributions but no income tax. These people will start getting rebates in their pocket from the summer of 2025 but that- for many- will be 10 years too late and they will miss 9/10 years of incentives they’d have had in their pensions if they’d been saving under relief at source/

Pension companies who operate net pay have been slow to act. NOW did something but organisations like the PLSA have hardly mentioned this at its conferences and to its members as BAU. These organisations are now arguing for pension contributions to be made from the first pound of earnings, for most low-paid employees, this will be yet another headwind as they struggle to meet the consequences of these national insurance payments.

Meanwhile, the tax privileges of the wealthy, full tax-relief at source, tax-free growth on investments and virtually unfettered tax-free cash with no lifetime allowance, continue.

In my opinion, the budget is a disaster for the low paid worker not working for a micro-company. It spells greater job insecurity, lower wages and a disincentive to work. I do not think that Rachel Reeves feels good about this, but it is the impact of lowering the threshold for NI as she has and if we care about inclusivity , we should be deeply worried about the IFS’ analysis and the headline it brings.