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New national insurance contribution policy wins approval

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The new government’s decision to drop the planned 1 per cent increase in national insurance contributions for large numbers of staff has been applauded by a leading business group.

The Conservative-Liberal Democrat government has confirmed plans to raise employers’ national insurance thresholds, but not those of employees.

Although the 1 per cent employers’ NIC rise will still affect staff earning more than £20,800, the threshold at which they begin paying NIC on employees earning up to that figure will increase by £21 per week.

This means that most will be spared a major tax increase.

Phil Orford, the FPB’s chief executive, said: “Small businesses did not want this tax on jobs because clearly it would have been a major barrier to staff retention and job creation and would have hindered economic recovery.

“For the majority of employers it would have proved to be an unpopular and unworkable tax rise. Although not perfect, the new coalition government’s policy on NI is far better and provides a degree of certainty for business growth now and in the future.”

According to the latest Economy Watch survey carried out by the FPB, 43 per cent of small businesses cited the cost of employment as the joint biggest barrier to recruitment, along with economic conditions.

The interim results of the survey, due out in full on 19 May, revealed that 60 per cent of respondents believe the new government should prioritise tax simplification, with 45 per cent opting for reduced obstacles to employment and 38 per cent choosing a fairer distribution of the tax burden.