Government urged to scrap National Insurance tax increase

22 January 2010

Next year’s planned rise in National Insurance contributions should be dropped, two business groups have argued.

The Chartered Institute of Personnel and Development (CIPD) and the British Chambers of Commerce (BCC) have sent a joint letter to the Business Secretary, Lord Mandelson saying that the 1 per cent increase, set for April 2011, could hit the economic recovery.

The letter was prompted by recent research from the CIPD which revealed that 12 per cent of employers intend to recruit fewer staff as a result of the planned hike in employers’ NICs, while 8 per cent will make job cuts.

It is important, the groups said, that the government avoid any further statutory increases in the cost of employing staff during what looks like being a "jobs-light" economic recovery.

Along with scrapping of the NIC increase, designed by the Chancellor to tackle the UK’s huge budget deficit, the CIPD and BCC also called for a freeze in the youth and development rates of the national minimum wage to avoid undermining the government’s own measures aimed at combating unemployment among young people.

John Philpott, the CIPD’s chief economic adviser, said: “The combined efforts of the government, the Bank of England, employers and workers have helped limit the impact of the recession on jobs and prevented unemployment from rising as much as feared.

“But it’s just as important that nothing is done to put jobs at risk during the recovery. With many employers struggling to contain labour costs this year and next against a likely backdrop of still subdued demand, the planned hike in NICs will inevitably cost jobs."