Two leading business groups have called on the government to scrap next year’s National Insurance (NI) increase because it would put the economic recovery at risk.
The Chartered Institute of Personnel and Development (CIPD) and the British Chambers of Commerce (BCC) have written a joint letter to business secretary Lord Mandelson to warn of the consequences of the 1% increase in employers’ NI Contributions scheduled for April next year.
The organisations also recommend a freeze in the youth and development rates of the National Minimum Wage to avoid counteracting the impact of the government’s existing measures to combat rising youth unemployment.
They warn that the extra financial burden on businesses will dampen any upturn in the labour market.
Dr John Philpott, chief economic adviser for CIPD, said: “With many employers struggling to contain labour costs this year and next against a likely backdrop of still subdued demand, the planned hike in NI will inevitably cost jobs.
“While the government is rightly devoting taxpayers’ money to helping Britain’s one million jobless young people, it would be absurd at the same time to raise the youth minimum wage.”
A CIPD survey has revealed that 12% of employers intend to recruit fewer staff as a result of the planned hike and just under one in 10 report that it will force them to make job cuts.
Adam Marshall, BCC director of policy said: “The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive economic recovery.
“Employers will create jobs and wealth, but the [BCC estimates that the] rise in National Insurance in 2011 will mean £14bn in extra costs over the next four years. That is little more than a tax on jobs and it must be scrapped.”
© Crimson Business Ltd. 2010