Rishi Sunak says the way we tax work is broken – and AI is about to make it much worse
Former UK Prime Minister Rishi Sunak has issued a stark warning about the intersection of AI and the job market, arguing that the current system of taxing employment is outdated and could accelerate job displacement as companies increasingly turn to AI tools.
In a column published in The Times, Sunak called for an urgent rethink of how governments tax work. He highlighted employer national insurance contributions (NICs) as a key issue: businesses face immediate payroll taxes when hiring humans, but no equivalent burden when deploying AI systems to handle tasks.
“You are far more likely to lose your job to someone using AI than to AI itself,” Sunak wrote, noting that the technology tends to augment or replace specific roles rather than wipe out entire categories overnight. “The choice is whether we try to shape this change, or whether we let it swamp us.”
Sunak pointed to emerging evidence that AI is already reshaping hiring patterns.
Official statistics often lag behind real-world shifts, but early indicators show a slowdown in recruitment, particularly for younger workers entering the workforce.
In AI-exposed occupations, job entry rates for those aged 22-25 have declined compared to pre-2022 levels, according to data referenced in his piece. Surveys also indicate that 41% of businesses believe AI enables headcount reductions, while nearly a third now consider automation before filling human roles.
Employer NICs generate more than £100 billion annually for the UK Treasury, but recent hikes have added to the cost of hiring at a time when firms are actively exploring AI, offshoring, and other alternatives to reduce labour expenses.
Sunak argued this creates a structural bias in the tax code that tilts against human employment precisely when companies are making critical decisions about automation.
He urged policymakers to consider shifting the burden away from taxes on jobs, perhaps following models in countries like Denmark or New Zealand, which rely more heavily on income or consumption taxes, to avoid disincentivising hiring.
While he backed initiatives like Chancellor Rachel Reeves’ proposed AI economics institute, he stressed it must have access to real-time data from job markets and tech companies to be effective.
