Reeves’s tax rises on employers start to bite as unemployment jumps
For the past few months, the true impact of Labour’s increases in labour costs has been clouded by a fog of contradictory data, but the latest jobs figures suggest that murkiness could be beginning to clear.Those who feared the rise in employers’ national insurance contributions (NICs) would lead to job losses are being proved right.The unemployment rate climbed by 0.2 percentage points to 4.5% between January and March – the highest level for nearly four years.
Concerns that the number of vacancies would drop have also come true.Employers are refusing to take on new staff, pushing the vacancy rate back towards its pre-pandemic level.However, that’s not the whole picture, with data showing employers have begun to ease back on above-inflation pay growth.Average weekly earnings that exclude bonuses rose by 5.6% in the first three months of the year compared with the same quarter in 2024.
That annual growth rate was down from 5.9% in the three months ending with February and below the consensus among City economists of a milder drop to 5.7%.There are other ways employers could adjust to the higher NICs and national living wage increase.They could reduce profits and increase prices.
The Bank of England said last week that it expected private-sector employers to take a hit to their profits, sharing the pain with their shareholders.Unfortunately, the evidence for this is absent simply because the Office for National Statistics has not produced any data since last summer on the profitability of UK companies.So the Bank is guessing.Forecasts for inflation are also guesswork, though there is a growing suspicion that companies that exercised their monopoly pricing power during the pandemic will again try to convince consumers they need to pay much higher prices for their goods this year.Data out on Wednesday next week on the inflation rate in April will give the first signs as to whether that theory is correct.
If lower average profits and slightly higher prices become part of the response, then you might say everyone is sharing the pain from higher employment taxes.The problem for Labour is that the biggest hit is felt most acutely by employers in very visible areas of the economy, such as retailers, hospitality businesses and the charity sector.Ministers must be concerned that the lower number of vacancies is colliding with a rising number of people wanting employment, making for a very large and discontented group of people who want to break into the labour market but cannot.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionIt all suggests the hangover from the pandemic is still causing pain in the form of huge mismatches between what employers want and what workers can offer.The cure for this ill can only be investment in skills.
Yet that is in short supply at the moment,And while Rachel Reeves blames the uncertainty caused by Donald Trump for depressing investment, and the economy more broadly, she must shoulder some of the blame,The tightrope she must walk to stick to her self-imposed fiscal rules is clearly another factor,To balance the books in the next budget, which the chancellor says she must, is going to be tough and might mean the government needs to impose even more tax rises on employers,If this worry persists among employers, it is sure to combine with Trump-induced uncertainty to delay any jobs recovery.
AI firms warned to calculate threat of super intelligence or risk it escaping human control
Artificial intelligence companies have been urged to replicate the safety calculations that underpinned Robert Oppenheimer’s first nuclear test before they release all-powerful systems. Max Tegmark, a leading voice in AI safety, said he had carried out calculations akin to those of the US physicist Arthur Compton before the Trinity test and had found a 90% probability that a highly advanced AI would pose an existential threat. The US government went ahead with Trinity in 1945, after being reassured there was a vanishingly small chance of an atomic bomb igniting the atmosphere and endangering humanity.In a paper published by Tegmark and three of his students at the Massachusetts Institute of Technology (MIT), they recommend calculating the “Compton constant” – defined in the paper as the probability that an all-powerful AI escapes human control. In a 1959 interview with the US writer Pearl Buck, Compton said he had approved the test after calculating the odds of a runaway fusion reaction to be “slightly less” than one in three million
Paul McCartney and Dua Lipa among artists urging Starmer to rethink AI copyright plans
Hundreds of leading figures and organisations in the UK’s creative industries, including Coldplay, Paul McCartney, Dua Lipa, Ian McKellen and the Royal Shakespeare Company, have urged the prime minister to protect artists’ copyright and not “give our work away” at the behest of big tech.In an open letter to Keir Starmer, a host of major artists claim creatives’ livelihoods are under threat as wrangling continues over a government plan to let artificial intelligence companies use copyright-protected work without permission.Describing copyright as the “lifeblood” of their professions, the letter warns Starmer that the proposed legal change will threaten Britain’s status as a leading creative power.“We will lose an immense growth opportunity if we give our work away at the behest of a handful of powerful overseas tech companies and with it our future income, the UK’s position as a creative powerhouse, and any hope that the technology of daily life will embody the values and laws of the United Kingdom,” the letter says.The letter urges the government to accept an amendment to the data bill proposed by Beeban Kidron, the cross-bench peer and leading campaigner against the copyright proposals
‘Tone deaf’: US tech company responsible for global IT outage to cut jobs and use AI
The cybersecurity company that became a household name after causing a massive global IT outage last year has announced it will cut 5% of its workforce in part due to “AI efficiency”.In a note to staff earlier this week, released in stock market filings in the US, CrowdStrike’s chief executive, George Kurtz, announced that 500 positions, or 5% of its workforce, would be cut globally, citing AI efficiencies created in the business.“We’re operating in a market and technology inflection point, with AI reshaping every industry, accelerating threats, and evolving customer needs,” he said.Kurtz said AI “flattens our hiring curve, and helps us innovate from idea to product faster”, adding it “drives efficiencies across both the front and back office”.“AI is a force multiplier throughout the business,” he said
Leave them hanging on the telephone | Brief letters
Regarding dealing with cold callers (Adrian Chiles, 7 May), it’s irritating I know, but if you don’t mind your phone being inaccessible for a few minutes, why not say: “Hang on, I’ll go and get him/her”, and then leave your phone until the caller rings off? At least you will have wasted some of their day.Robert WalkerPerrancoombe, Cornwall Re fostering a love of reading in children (Letters, 6 May), one of my fondest memories of my teaching career was story time in the infant class in a local village school. Most of the children came quite a distance on buses. They adored Michael Rosen’s poetry. There were many afternoons when it was home time and they would shout: “Please read another Michael Rosen one, Mrs Mansfield, the driver won’t mind waiting
Wikipedia challenging UK law it says exposes it to ‘manipulation and vandalism’
The charity that hosts Wikipedia is challenging the UK’s online safety legislation in the high court, saying some of its regulations would expose the site to “manipulation and vandalism”.In what could be the first judicial review related to the Online Safety Act, Wikimedia Foundation claims it is at risk of being subjected to the act’s toughest category 1 duties, which impose additional requirements on the biggest sites and apps.The foundation said if category 1 duties were imposed on it, the safety and privacy of Wikipedia’s army of volunteer editors would be undermined, its entries could be manipulated and vandalised, and resources would be diverted from protecting and improving the site.Announcing that it was seeking a judicial review of the categorisation regulations, the foundation’s lead counsel, Phil Bradley-Schmieg, said: “We are taking action now to protect Wikipedia’s volunteer users, as well as the global accessibility and integrity of free knowledge.”The foundation said it was not challenging the act as a whole, nor the existence of the requirements themselves, but the rules that decide how a category 1 platform is designated
Tech giants beat quarterly expectations as Trump’s tariffs hit the sector
Hello, and welcome to TechScape. I’m your host, Blake Montgomery, and this week in tech news: Trump’s tariffs hit tech companies that move physical goods more than their digital-only counterparts. Two stories about AI’s effect on the labor market paint a murky picture. Meta released a standalone AI app, a product it claims already has a billion users through enforced omnipresence. OpenAI dialed back an obsequious version of ChatGPT
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Tory energy spokesman claims UN climate experts are ‘biased’
Labour to defend aid cuts, claiming UK’s days as ‘a global charity’ are over
Counter-terrorism police investigate fires at properties and car linked to Keir Starmer
Starmer accused of echoing far right with ‘island of strangers’ speech
Labour MP says Starmer’s ‘island of strangers’ warning over immigration mimics scaremongering of far right – as it happened