Government urged to scrap "tax on jobs"

Two leading business groups wrote to Business Secretary Lord Mandelson warning of the consequences for industry of the 1% increase in employers' National Insurance contributions (NIC) from April 2011.

The Chartered Institute of Personnel and Development (CIPD) warned that one in eight firms intended to recruit fewer staff because of the increase, while almost one in 10 would cut jobs.

The British Chambers of Commerce added that the youth and development rates of the minimum wage should be frozen.

Dr John Philpott, CIPD chief economic adviser, said: "The combined efforts of the government, the Bank of England, employers and workers has helped limit the impact of the recession on jobs and prevented unemployment from rising as much as feared. But it's just as important that nothing is done to put jobs at risk during the recovery.

"With many employers struggling to contain labour costs this year and next against a likely backdrop of still subdued demand, the planned hike in NICs will inevitably cost jobs.

"And 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."

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 rise in National Insurance in 2011 will mean 14 billion in extra costs over the next four years. That is little more than a tax on jobs and it must be scrapped."

TUC general secretary Brendan Barber said: "Last year's moderate minimum wage increase took into account the recession.

"The UK is emerging from the downturn and average earnings are expected to grow by 2.3% this year.

"It would be completely unfair to punish low-paid young workers with wage freezes. With profit levels remaining high, we can afford a greater increase in the minimum wage without it impacting on job creation."