Small business 'job creation' scheme fails to impress

At just 13 months old, George Osborne's national insurance holiday for small businesses has already proved a flop.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
The scheme was introduced with great fanfare at the close of 2010. Some 400,000 employers will take up the scheme over three years, declared the Chancellor, saving on national insurance contributions for their first 10 staff (to a maximum value of £5,000 per hire). There would be an employment boom as 800,000 new employees flocked to their new roles and business owners and staff alike would rejoice and praise his name.

Alas, new data released by the Treasury has shown that the initiative has only attracted a measly 10,000 applications. That’s around 12,400 new placements saving on national insurance payments. Better than nothing, you may argue. Except that the scheme has so far cost £12m to set up and administer - employers have saved just £6m in total. As sparky, economy-boosting plans go, this is the ultimate damp squib.

Part of the problem is that the scheme excludes London, the South east and the East of England. Osborne’s reasoning at the time was that he wanted to stimulate enterprise outside existing hotspots and balance out the concentration of power in the City, to ‘help create new businesses in those regions where the private sector is not nearly strong enough,’ as he said in his June Budget. But, at a time where firms all over the country are suffering from a lack of available credit and a skills shortage (despite the overwhelming unemployment figures), it proved a poor gamble.

The scheme only runs until next September so, while the Treasury claims it will do all it can to drum up more interest, it’s unlikely to achieve anything like the scale forecast by George. The Chancellor is now under pressure to widen the initiative so that start-ups from anywhere in the UK can take part. Cave he might, but the scheme still goes in the drawer marked ‘over-hyped, under-performing SME initiatives’, which is a lot fuller than the one labelled 'really successful SME wheezes'. Better luck next time, eh?

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