By Daniel Hunter
Extending the National Insurance Contributions (NICs) holiday to all micro-firms across the UK would create 45,000 jobs according to new research from the Federation of Small Businesses (FSB).
The FSB's research shows that over a two year period, if the scheme were to be opened up to all micro-firms across the UK, it would add 45,000 jobs and £1.3 billion in GDP. However, only 27,000 jobs would be created if this scheme were extended to all businesses within the current scheme's limited area, adding almost £700 million to GDP.
The FSB is calling on the Chancellor, at the Conservative party conference in Birmingham this week, to look at the FSB's proposal which could be implemented when the current scheme ends in September 2013 and run until the end of the Parliament in 2015.
The current NICs scheme, which Government gave £800 million to fund, gives new businesses outside the south east, east of England and London a break in paying National Insurance for up to 10 new staff they take on. Only 15,000 firms of the projected 200,000 have used the current holiday scheme, in place since June 2010.
Previous FSB research has shown that payroll taxes, such as NICs, are a major barrier to hiring for already established businesses. One in four respondents to a recent FSB survey said this was a major factor to not hiring. However, more than half (53%) said that a NICs holiday would encourage them to take on staff.
The research estimates that the scheme could be implemented UK-wide for around £500 million — less than the current budget for the scheme — when the wider economic impact of getting people into jobs, paying income tax and having disposable income is taken into account.
"The National Insurance Contributions holiday is the Government's flagship policy to boost employment but it hasn't anywhere reached the levels that were predicted," John Walker, National Chairman, Federation of Small Businesses, said.
"The weak economy and fragile business confidence caused by the return to recession means that start ups haven't taken on staff as quickly as they might have done had the economy been stronger.
"Extending the scheme will involve a financial outlay by Government, but having more people in work will increase tax revenues in the long run as more people are paying tax than receiving help from the state through Job Seekers Allowance, for example. Not just that, but getting people into full time work will mean they have more money to spend increasing revenue from VAT."
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