Rachel Reeves announced the first budget from the new Labour government yesterday, with major spending commitments on health and transport, and a £40bn increase in tax – including a sharp hike in employers’ National Insurance obligations.
In a move which will increase pressure on the finances of co-ops and other businesses, employers will pay NI at 15%, up from 13.8% – and the threshold is lowered to include all workers earning £5,000. And the minimum wage will rise from £11.44 an hour to £12.21 an hour from April.
But the retail sector has welcomed further commitments to tackling store crime. The budget also features measures on employee ownership, community energy and business rates which have been welcomed by co-operators.
Co-op Party policy officer Daniel Monaghan welcomed a “commitment to support co-operative growth across the country through the upcoming Small Business Strategy”.
This, he said, “will outline the Labour government’s vision to support small business and grow the co-operative economy by making it easier to access finance, expand into domestic and international markets, and build business capabilities and innovation. The new Small Business Strategy, which will sit alongside the Industrial Strategy, will support start-up co-ops and other forms of business, as well as existing small businesses looking to grow their operations, export and diversify.”
Related: Co-op Party event reiterates ambitious co-op economy growth pledges
The budget also announced new reforms which will support and incentivise genuine employee ownership across the economy, he said, arguing that the new measures will reinforce employee engagement and participation.
David Alcock from Antony Collins solicitors also noted this measure, saying in a blog post: “The government notes that ‘changes outlined above are intended to ensure that the reliefs remain focused on the policy objectives of rewarding employees and encouraging employee engagement.’ We agree.”
Rule chances on employee ownership mean that, for a disposal of an employee ownership trust to qualify for capital gains tax relief, the majority of the trustees must consist of persons other than the former owners or people/companies connected to them. “This was a proposal supported by the sector and we agree that this constitutes good practice,” said Alcock.
The government will also require trustees to be residents in the UK going forward, “thus ending the practice of ‘off shore’ trustees and ensuring transparency,” Alcock noted. “Again, the balance of the sector supported this change.”
But while EO businesses will be able to pay tax-free bonuses to employees without needing to pay directors as well, “the government have declined to extend this relief to co-operatives,” he added.
Another key point in the budget is the £125m million capitalisation of Great British Energy, including £100m specifically for the development of new clean energy projects. This, said Monaghan, “will enable the delivery of new projects including those delivered through the Local Power Plan, which represents the largest expansion of community energy in British history and has long been championed by the Co-operative Party.
“This capital investment in new clean energy projects could facilitate new opportunities for community energy groups across the country to expand projects in solar, wind and hydro power.”
Duncan Law, head of policy and advocacy at Community Energy England, said: “We welcome the uplift in funding for the Department of Energy Security and Net Zero and the £125m for Great British Energy alongside the £3.4 bn pledge for the Warm Homes Plan.
“As the energy minister has said, this government is putting ‘local communities and stakeholders at the heart of the energy transition’. We welcome the boldness of the budget but warn that disproportionate amounts of money are still going to big tech, centralised, supply-side measures such as carbon capture, utilisation and storage, and nuclear, which will not deliver cost-effective carbon savings in time, if ever.
“This money, if directed to local transition projects, including upscaling retrofit and enabling local energy projects that reduce the need for hugely expensive grid upgrades, would deliver permanent transformation and carbon/money savings and real benefit to people.”
Co-operatives UK, the national apex for the co-op sector, also welcomed the measures on community energy and small business growth.
Posting on LinkedIn, it said: “We’re thrilled that government has included co-operative growth in the scope of the Small Business Strategy for 2025. This is a fantastic opportunity for the sector, and we’ll work to ensure all voices are heard.”
On energy, it argued: “To fully leverage the £100m allocated for renewable projects next year, we need to mobilise community investment at scale. Our expertise in this area is crucial. Additionally, we recommend that government adopts the innovative retrofit co-operative model for the Warm Homes Programme, ensuring maximum value and impact (and we’re ready to help).”
It added: “Measures to protect small co-operatives from increases in business rates and National Insurance contributions will be a welcome relief for many in our community. Co-operative new-starts are more than twice as likely to survive the difficult first five years – but support for new-starts and smaller members is crucial.”
But the NI hike remains a concern for bigger co-ops, adding pressure to their bottom line. Shirine Khoury-Haq, CEO of the Co-op Group, said: “As a member-owned business we are absolutely committed to doing right by all our 55,000 colleagues. Difficult choices have been announced today which will have a significant impact on our business in the coming years.
“We would, however, urge the Government to follow through on its commitment to removing age rates within the National Living Wage and to consider removing the separate apprenticeship rate. At Co-op, we pay the Real Living Wage to all colleagues, regardless of age or apprenticeship status, reflecting our belief in fair pay for all.”
She welcomed commitments on retail crime – an issue which has long blighted the Group and other co-op retailers, and has been a campaign focus for the co-op movement. “We have long campaigned against rising violence and abuse directed at shopworkers,” she said, “so we’re hopeful that the removal of the £200 threshold alongside new funding will make a real difference in tackling the repeat offenders and organised gangs driving retail theft.”
The tax-and-spend tone of the budget was given a cautious welcome by Tony Armstrong, CEO of Locality, a support body for community enterprise, who said: “Rachel Reeves’ budget marked a significant shift of fiscal and economic policy. We welcome the government’s investment to improve health, housing, economic opportunities and local government services. The promise of an end to austerity will be welcomed by our members, although this needs to be felt in real terms. Like our public services, community organisations have faced multiple crises, increased demand and tighter budgets. Many will find it difficult to cope with additional staffing costs without new income sources.”
He warned: “Much of the budget’s impact on communities will be in the detail. We do know that the government has committed to work in partnership with the voluntary, community and social enterprise sector and this needs to be delivered on.
“Community organisations play a crucial role in driving economic development, providing vital services and bringing people together. We look forward to working with the government on specific investment and support so that community organisations can really help their neighbourhoods thrive.”
Community business think tank Power to Change responded to the budget on X, welcoming action on “£2.5bn of levelling up funding that was stuck in limbo”.
“Ending the uncertainty and honouring the commitments made to communities is the right choice for government to make,” it added, “one we commend them for making in difficult circumstances.”
But it called for clarity on round 4 of the Community Ownership Fund, which is still awaiting confirmation.
“Government must keep listening to the public and make sure councils work with their local community to ensure the money is well spent on the things people care about,” said CEO Tim Davies-Pugh. “The move towards a new model of regeneration funding that is allocative and based on need is the right one.”
Power to Change also welcomed plans to transform business rates, “which will bring about a much-needed equalisation between brick and mortar and online business. In doing so, government will help bring life back to our struggling high streets.”
Policy and insight director Nick Plumb added: “Plans to introduce a permanently lower business tax for retail, leisure and hospitality will be welcomed by community pubs and shops.
“It’s important that the next stages of the government’s business tax reform plans also recognise the wider contributions of the diverse community business sector in improving social and economic productivity of our high streets and providing a meeting place for local communities.”
But, warned Power to Change: “Many community businesses cannot wait for long-term reforms. A similar interim rates relief is needed. This would ensure communities can do business on the high street and continue to reinvest in their local economies.”
Robin Fieth, CEO of the Building Societies Association, welcomed commitments on housing.
“After years of insufficient house building, the announcement from the new chancellor of an additional £5bn of funding to deliver more housing was good to hear,” he said. “We particularly welcome the increased support to smaller housebuilders as a route to help achieve house building targets.
“We need a range of properties across all tenures, including affordable housing schemes, to tackle the UK housing crisis. We therefore welcome the increase to the Affordable Homes Programme to £3.1bn. It is now essential that there is a clear affordable homes strategy which builds on existing, successful schemes, such as shared-ownership.
“We hope the government will commit to working with all stakeholders, including lenders, the wider housing market industry and the public, to create a long-term housing strategy with the sole aim of making homes more available, more affordable and more appropriate to the needs of those living in them. We stand ready and willing to support them with this.”
