Region reacts to Tory plans to scrap NI hike

THE Tories have outlined plans to block some of next year’s planned National Insurance tax rises.

The move follows Chancellor Alistair Darling’s announcement that there would be a rise in National Insurance for both employers and employees. The 1p hike, affecting anyone earning more than £20,000, is due to come into effect next April.

But Shadow Chancellor George Osborne announced yesterday that his party’s plans to block the hike would benefit anyone earning up to £45,400, although the new rate would apply to higher earners.

Alan Hall, regional director of the manufacturers’ organisation EEF, said: “Some employers will be relieved at the Conservative’s plans to reverse partially the rise in National Insurance. But until they see more detail on how the deficit will be reduced, they will be concerned at what this might mean for future tax rises and potential cuts in critical spending to improve our infrastructure.

“They will also remain frustrated that they’ve heard little or nothing from any of the main parties about how they will tackle the urgent tasks of reducing the public sector deficit and rebalancing our economy.”

Miles Templeman, director general of the IoD, said: “George Osborne’s proposal to cancel part of the planned increase in National Insurance Contributions is welcome. The NIC hike is a tax on jobs and we have argued throughout that it was a mistake, particularly in a period of high unemployment. In a survey of 1,800 business leaders conducted this month, 43% said that the rise would discourage them from taking on new staff.”

Richard Wightman, president of Yorkshire & Humber Chambers of Commerce, said: “Raising the cost of employing people at the time we want Yorkshire businesses to be creating jobs is the wrong tax at the wrong time. Businesses will therefore cautiously welcome today’s announcement but we want the politicians to go further by scrapping the tax hike on employers altogether.

“Even under the Tory plans, businesses across our region will be paying millions more in National Insurance next year. This is a direct tax on jobs which will make it more difficult for the private sector to drive forward the fragile recovery and get people back to work. However, it’s a step in the right direction.”

It is believed that the full rise would cost the region’s economy £340m a year –  the equivalent of 14,700 jobs.

A survey last month by the Chambers of Commerce revealed that 38% of businesses would hold back wage increases, 19% would limit staffing levels and 7% would cut the size of their workforce.

The Chambers have been asking members to sign a petition opposing the increase at www.no-nics-rise.co.uk.

The British Chambers of Commerce said scrapping the rise should be paid for by a 1% rise in VAT.