Rachel Reeves dealt blow as expert warns tax will ‘decimate’ sector key to Angela Rayner

Labour’s planned National Insurance increase is facing strong opposition from construction industry leaders who claim it will severely damage the sector’s ability to deliver the government’s housing targets.

Steven Mulholland, Chief Executive of the Construction Plant-hire Association, has issued a stark warning that the tax hike could push many family-run construction firms to the brink of collapse. 

The proposed changes come at a critical time for the industry, which is already grappling with an acute skills shortage and rising operational costs. Mulholland described the National Insurance increase as “a tax on jobs” that will make it significantly harder for businesses to recruit and retain workers.

This could have serious consequences for major infrastructure projects, including the planned expansion of Heathrow Airport, as well as Labour’s flagship pledge to build 1.5 million new homes during this parliament. 

Industry experts warn the tax burden doesn’t exist in isolation. When combined with upcoming changes to Business Property Relief and Inheritance Tax, many small and medium-sized construction firms may find their operating models becoming unsustainable.

These family-run businesses form the backbone of the UK’s construction sector and their potential decline could have far-reaching implications for housing delivery and infrastructure development. 

The government maintains its planning reforms will stimulate growth and accelerate building projects. The Planning and Infrastructure Bill recently passed its first Commons vote by a significant majority, with Housing Secretary Angela Rayner describing it as transformative legislation that will remove barriers to development.

However, construction leaders argue these benefits could be undermined if the tax changes make it impossible for firms to operate profitably. 

With local elections approaching, the dispute highlights growing tensions between Labour’s economic policies and its ambitious housing agenda.

As the construction industry sounds the alarm, the government faces increasing pressure to reconcile its tax plans with the practical realities facing businesses expected to deliver its key manifesto commitments. The outcome of this balancing act could determine whether Labour meets its housing targets while maintaining a healthy construction sector.