On a rainy, grey Tuesday in Leeds, Maya is hunched over a spreadsheet, surrounded by the sounds of milk steamers and mid-morning chatter. A café owner, she is doing the new maths of employing people in Britain: adding up hours, subtracting sickness, and now, since April, multiplying by a bigger number. The employer National Insurance contribution is 15% and bites from £5,000 of annual earnings, not £9,100 as before. That invisible percentage point and lower threshold don’t come with ribbon or ceremony. They just creep into the cost of every latte pulled and every shift added to the rota. 

Ministers will point out there’s also an increased Employment Allowance to soften the blow, a bigger buffer for smaller firms. They’re right: it jumped to £10,500 this year. But buffers compress under weight, and for labour-intensive sectors like hospitality, care and retail, the weight is unmissable when set alongside a higher minimum wage and other rising input costs. In thousands of small offices and shop back-rooms, the conversation is the same: can we afford the extra Saturday shift? Do we keep the trainee? What about paid overtime? 

The Treasury argues the higher employer NI is part of repairing the public finances after a decade of shocks. And in revenue terms, it matters: the Office for Budget Responsibility’s March outlook flagged National Insurance as a rising share of receipts, with the 2025–26 bump driven in large part by the employer rate rise. These are not marginal sums. But who ultimately pays is murkier than a line item. Economists call it “incidence”: a tax can be levied on businesses and still end up falling on workers through slower wage growth or on customers via prices. Over time, the costs seep, first into hiring decisions and hours, then into posted prices and the texture of local job markets. 

Spend a morning with Maya’s numbers and you see what that seepage feels like. An extra barista for the Saturday rush now breaks even only if turnover climbs by more than any sensible forecast. She keeps the team but trims overtime and delays the holiday cover she’d promised. Up the road, a care-home manager makes a tougher call: fewer agency shifts this winter, and a pause on taking new residents needing high-support hours. No one “pays the tax” in isolation; the cost disperses across payrolls, prices and access to care.

The story doesn’t end at the workplace door. It flows into the other half of Britain’s balance sheet: a state trying to do more with a settlement that, outside protected departments, still squeezes. The past decade taught us what sustained austerity does to the social fabric. Peer-reviewed studies linked spending constraints to tens of thousands of excess deaths relative to pre-2010 trends, and found frailty rose faster among older adults during the austere years, especially in poorer groups. Preventive services with some of the best returns in public policy were pared back. When budgets bite, problems don’t vanish; they migrate, often into A&E, police cells and overcrowded waiting rooms. 

One emblem of this slow undercutting is the public health grant. It funds the unglamorous, quietly heroic things: stop-smoking support, drug and alcohol treatment, school nursing, health visiting; that keep people well enough not to need hospital beds. Since 2015/16, that grant has been cut by roughly a quarter to nearly a third per person in real terms, depending on the measure. Councils have had to choose between trimming opening hours or closing services entirely, often in the very places where need is greatest. The Treasury’s own advisers and independent think tanks repeat the same plea: prevention isn’t a nice-to-have; it’s the cheapest way to shrink tomorrow’s bills. 

When you widen the lens, the choice to raise a broad-based payroll tax during a period of weak productivity looks less like neutral arithmetic and more like a bet on where pain is least politically visible. There is a reason business groups warned of reduced hours, slower hiring and price rises this year: when margins are thin, labour costs are decisive. 

The deeper worry is about composition and timing. The UK needs growth that hires and heals. Raising the price of employing someone while allowing preventive budgets and social care to fray is a double-bind: it restrains the very job creation we claim to want and inflates the downstream costs of untreated illness, isolation and crisis care. The result is a health service permanently on the back foot, a labour market that struggles to absorb young and lower-skilled workers, and a politics that keeps paying more for emergencies because it wouldn’t pay enough for maintenance.

There was, and still is, another way to do this. You can design payroll policy with scalpels, not mallets: targeted NICs relief for net new hires, for younger workers or roles below a certain wage band, where evidence shows employment is most sensitive to labour taxes. You can pair any broad-based rises with iron-clad protection for the public health grant and a plan to stabilise social care, two moves that reduce hospital demand and raise NHS productivity far more than exhortations ever will. And you can shift more of the consolidation burden onto bases and reliefs that carry a lower growth drag than the tax on jobs. None of this is pain-free; all of it is smarter. 

Back in Leeds, Maya finishes the rota. She keeps everyone on, but trims overtime and quietly shelves the plan to take on an apprentice this autumn. It’s a small decision in a small business, the sort that will never make a headline. But add up a hundred thousand of these and you have a labour market with less give, a care sector with less resilience, and a health system meeting preventable disease later and at greater cost.

Fiscal policy decides what a country gets used to. If we choose to raise money by making employment dearer while letting the foundations of public health erode, we habituate ourselves to slower wage growth, thinner job ladders and worsening health inequalities that no winter-crisis press conference can hide. If we choose prevention, targeted hiring incentives and investment that crowds in private activity, we habituate ourselves to something better: a state that buys fewer emergencies because it bought more stability, and an economy where hiring the next worker is a little easier than it was yesterday.

Invisible taxes have visible consequences. You can see them in the rota, the ward, and the waiting room. The only question is whether we’re willing to look.