We, the undersigned, call upon the Government to reverse the 1 percentage-point employer National Insurance Contributions (NICs) increase planned for April 2011.

Businesses across the country know that it is imperative for the Government to begin the difficult job of repairing the public finances. But this NICs increase is a 'tax on jobs' - and will discourage companies of all sizes from taking on new staff at a critical point in our economic recovery.

 

We urge the Government to work with business groups to find alternative ways to close the UK's budget deficit - beginning with a credible plan to reduce inefficiency in public sector spending. Any Government has to realise that additional taxes on businesses, especially small- and medium-sized companies, must be a last resort, not an easy way forward.

 

The importance of reversing this damaging NICs increase is clear:

Recent analysis by the British Chambers of Commerce, using the Government's own impact assessments, found that employers face a staggering bill of £25.6bn just to comply with new regulations between 2010 and 2014 - of which over £14bn is the NICs increase;


Detailed research by the Federation of Small Businesses, together with the Centre for Economics and Business Research, found that a 1p increase in NICs could result in the loss of 57,000 small business jobs - and could cost the Exchequer £900m in additional social security payments;


In a recent survey of Institute of Directors members’ views on tax changes, an overwhelming 84% believed that even a half percentage point increase in employer NICs would have a negative impact on the UK economy;


The CBI believes this NICs increase will have a severe impact on every business in the UK. It makes no allowance for firms not making profits and will lead to a significant loss of jobs. The latest CBI Employment Trends Survey showed that almost three quarters of all businesses fear that the economic recovery will be put at risk and our flexible labour market eroded by increased employment legislation and taxes;


Data from the British Retail Consortium shows that the 1% increase in employer National Insurance Contributions will cost the retail sector an additional £220 million per annum, which equates to over 31,000 part-time retail jobs;


Recent research from the Forum of Private Business (FPB) found that 91% of members felt an increase in NICs would be damaging or very damaging for their business, with 27% stating that they were considering using freelance or part-time staff to avoid incurring extra payroll costs;


Research from the Chartered Institute of Personnel and Development found that 12% of employers intend to recruit fewer staff as a result of the planned hike in employers’ NICs, while 8% would cut jobs;


While research by the Recruitment and Employment Confederation (REC) found that 21 percent of companies were planning to take on new employees in 2010, recruiters fear this workforce expansion will be choked off by the planned hike in NICs payments.
 
The respected and independent Institute for Fiscal Studies has commented that 'employer [NI] contributions bear no relation to benefits provided under the NI scheme. These contributions are in effect simply a payroll tax'. From our perspective, further rises in NI mean fewer jobs, more people signing on, and a slower recovery for UK plc.