NI hike will cost companies £14bn, say business groups

The CIPD and BCC want the Government to ditch its NI increase - because it will stymie the recovery.

Last Updated: 31 Aug 2010

Two leading business groups have penned a strongly-worded letter to business secretary Lord Mandelson about the Government’s brilliant plan to increase National Insurance by 1% next year. The British Chambers of Commerce reckons this ‘tax on jobs’ will cost business an extra £14bn or so and barely dent the budget deficit, while the CIPD (the Chartered Institute of Personnel and Development, for those not in the know) points out that this is hardly going to encourage employers to take on more staff. And despite this week’s surprise fall in the unemployment figure, it’s clear that the Government still needs to be doing more to get people back into work...

The Government claims that the NI hike is necessary to plug the dirty great hole in our public finances, which currently stands at over £800bn. But in its missive to Mandy, the CIPD points to survey results showing that more than one in 10 employers predict the increase in NI will lead to them recruiting fewer staff. Worse still, 8% say they would go one step further and actually cut jobs to avoid the extra cost. Since employers need all the help they can get at the moment, the groups argue that the increase – which they say is ‘little more than a tax on jobs’ – should be scrapped pronto.

Indeed, the BCC insists the ‘cost of employing people’ must be reduced across the board, which doesn’t just mean cancelling the NI hike. It also wants a freeze on the minimum wage for young people – with 1m young people currently out of work, it says, ‘it would be absurd to raise [it]’. Earlier this week it also warned that a wave of imminent new taxes and regulation would leave British businesses £25.6bn out of pocket over the next four years: including pensions reform, which will apparently cost business £4.8bn a year from October 2012, and the Agency Workers Directive, which it reckons will account for another £1.5bn.

It’s not rocket science: if employers are already reluctant to take on extra staff, raising NI and the minimum wage – not to mention bringing in extra regulation – seems like a rather odd way to encourage them. Yes, the deficit has to be paid back sooner rather than later. But the recovery won’t happen until employers start growing and feel confident enough to start hiring again. So the BCC’s idea of a three-year moratorium on employment laws isn’t without merit.

In today's bulletin:

Barack's bashing batters British banks
Retail sales disappoint - but frozen chickens boost Waitrose
Law firm unveils plan to retain top women
NI hike will cost companies £14bn, say business groups
Recession fraud provides rich pickings for private dicks?

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