Labour’s first Budget will be a catastrophe for employed jobs, especially for Minimum Wage jobs. Rachel Reeves has greatly increased the cost to businesses of having employees. Angela Rayner’s upcoming measures to improve employee rights will also impose cost. If all of these added costs are passed on to the businesses’ customers, that pushes inflation back up again. If the costs cannot be passed on, then it puts the business itself under pressure.

I have set out the changes in the area of both Minimum Wage jobs, and the associated Employer National Insurance Contributions (NICs). Then I have extrapolated the changes onto a notional business, whose size is at the lower end of a Small Enterprise on the SME scale. It is not a Microenterprise.

You can download the calculations here.

At the very least businesses are now going to pause hiring new staff, delay investments that might have required new staff, and give consideration to their existing staffing levels before the new rights and the higher employment costs come into effect. That is all an automatic dampener on national economic growth, but it also has negative consequences for employees and business owners alike. The latter are not predatory animals, but these kinds of extra costs push them into a corner.

The businesses’ owners are going to have to consider wiedling the axe to their staffing, before the axe falls on their own heads. Reeves and Raynor seem to believe that UK businesses are so prosperous that they can absorb meaningful extra dollops of costs, but you can be sure that owners do not see it the same way.

Let’s think of an example business (and there is no typical one) with 30 employees, 20 of whom are on £2,000 a month (£24,000 per annum, somewhere around average wages for someone in an employee job), 5 are aged over 21 and on the Minimum Wage, and 5 are aged between 18 and 21 and on the Minimum Wage. The Minimum Wage earners are taken to be on 30 hours/week contracts. Even though the Annual Employment Allowance (paid out by the government when the business’ total Employer National Insurance liability is below £100,000) will rise from £5,000 to £10,000, this business’ annual payroll will increase by 5.3% from £667,780 to £703,435, after they have cashed in the £10,000 annual employment allowance.

There will be a small offset for larger businesses as the cap for eligibility for the Annual Employment Allowance has been removed, namely that the business’ total liability for Employer National Insurance should be £100,000 or less.

The increase in the payroll for the example company of 5.3% is just because of the increases in the Minimum Wage and Employer National Insurance, noting that far more of the pay of the Minimum Wage employees will now attract the new Employer National Insurance rate of 15%. Will the other 20 employees just sit there and be happy to have their wages frozen just so that things don’t get too tough for the employer? So that the colleagues on the Minimum Wage can go home with 7-16% extra, with the biggest increase going to the youngest, with the shortest tenure and probably the least skills? ‘What do we belong to a union for?’ ‘17% or we down tools.’ ‘We need it because you and all the others are trying to pass on these cost increases to customers, which is us, and everything we buy has gone up 5% at least.’

The question for the business, when confronted with those sorts of claims and threatened increases, becomes simply who do you get rid of. The cheapest, Minimum Wage ones – short service, low severance pay, but also a lower monthly saving? Or the older ones on better wages – bigger monthly saving as against higher severance, and loss of expertise – but how often do they go sick and are they really up to it any more? Or some in the middle? Or 10% from each category? Or why don’t we get a pre-pack adminstration, get shot of all of them and re-hire to a different mix: 50% on minimum wage, 50% on above minimum wage but at most £1,750 a month compared to £2,000 now? Or just withdraw our equity and shut down?

There is no chance at all of the increased levels of Employer National Insurance bringing in £25 billion.

That and the huge increases in percentage terms in the Minimum Wage will simply result in redundancies and lower job creation, hitting hardest the young, just out of school with modest qualifications, and those who need the flexibility that often goes with Minimum Wage work – because they have caring responsibilities, because for some reason a full-time job of 35 hours/week does not work.

The £25 billion won’t come in but the extra spending Reeves has announced will for sure go out – then there really will be a gaping black hole and no Tories lining up to take the blame, as well as Labour’s customary legacy: high unemployment.

Those consigned to unemployment won’t have to worry about the refrain from Rt Hon Rachel Reeves and The Labour Party about not raising taxes on working people – because they won’t be working people any longer. They will have been conscripted by Rt Hon Rachel Reeves into the ‘Reserve Army of Labour’, as Harold Wilson used to call the dole queue.