Coalition Must Scrap National Insurance Rise
Business groups have called on the new coalition government to scrap the planned National Insurance Contributions (NICs) rise entirely or risk deterring firms from recruiting.
The Liberal Democrats and Conservatives have agreed to partly ditch next year’s planned one per cent NIC rise, by raising the threshold at which employers start paying NICs by £21 per week ― saving them up to £150 per employee. However, plans to raise employees’ NICs for those earning more than £20,000 will still go ahead.
British Chambers of Commerce spokesman, Sam Turvey, said the whole of the employers’ NIC rise should be scrapped.
“Under the Labour Government, employers’ class one NICs rate was due to rise from 12.8 per cent as it is currently to 13.8 per cent in April next year. The coalition has agreed to raise the threshold at which employers have to pay NICs, reducing the cost of that increase by more than half.
“However, we have to keep the pressure on to ensure that they follow through on this, and we want to see the whole increase on the employers’ side scrapped. We want businesses to be able to invest in new people and help boost the economy, but when you add on extra bureaucracy and taxes it tends to put them off.”
Forum of Private Business spokesman, Phil McCabe, said:
“If it’s only partially scrapped it will still be an additional tax on employment, just at a time when small firms are looking to recruit in earnest in order to meet demand.”
The coalition agreement states that the reversal of the planned NICs increase would be paid for by bringing non-business capital gains tax into line with income tax rates, with exemptions for entrepreneurs. Plans were also outlined to hold a full public spending review in the autumn.
Turvey said that the private sector had been propping up the public sector for too long and that cuts must be made.
“The £6 billion in public spending cuts that has been proposed is a drop in the ocean compared to the country’s £163 billion Budget deficit. However, you have to be careful about making cuts to services too quickly.”
“The issue is about identifying where there is waste that can be scaled back ― for example, on pay. It’s not nice, but the private sector has had to freeze pay for the past two years.”
The Department for Business, Innovation and Skills was unable to comment on the coalition government’s policies.