Region’s businesses make most of tax contributions incentive

MORe than 1,000 new businesses in Yorkshire have cashed in on a Government scheme aimed at encouraging entrepreneurs to create jobs to tackle the North-South divide.

But Ministers are now facing calls to give more small firms a National Insurance break because take-up of the scheme is far lower than had been predicted.

The initiative – which allows new firms to save up to £50,000 in contributions for their first 10 employees – was unveiled by George Osborne in his first Budget when he became Chancellor and has been held up by the coalition as a flagship policy aimed at rebalancing the economy away from its heavy reliance on London.

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Fledgling firms in the region saved nearly £700,000 on their National Insurance bills in 2010/11 under the scheme but business groups are pressing for the rules to be relaxed so existing small companies can take part as well.

Simon Williams, Yorkshire chairman of the Federation of Small Businesses (FSB), said: “The FSB welcomes the steps that have already been taken to incentivise job creation but believes Government should go further. The FSB has long called for the current NICs holiday to be extended to existing businesses across the UK that have fewer than four employees and that employ up to the three more staff.”

Latest figures released by the Treasury show that by November 21, 10,170 companies had successfully applied to the scheme, including 1,290 in Yorkshire and the Humber. Of those, 62 were in the Leeds Central constituency, 59 were in Sheffield Central and 43 in Skipton and Ripon.

Some 426 Yorkshire firms submitted claims relating to the 2010/11 financial year, saving £680,000 which they would otherwise have had to pay in National Insurance contributions for 1,451 employees. Nationally, firms benefited from just over £6bn in this period.

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But the figures are considerably below the 400,000 businesses the Government had predicted would benefit by the time the scheme ends in September 2013, and the majority of the £940m budget remains unspent.

Skipton and Ripon MP Julian Smith said: “I’m pleased Yorkshire and the Humber has one of the highest take ups of this scheme which I support. I’ve already made representations to Government to make the scheme automatic for companies rather than something they have to apply for.

“There seems to be some European restrictions on doing this but I will continue to make those representations. I’ll also make the case for this scheme being extended or being promoted as much as possible.”

Owen Smith, Labour’s shadow Treasury Minister, said the scheme had been a “total flop” and called on the Government to extend the scheme to all small firms who take on extra workers. “This will help small businesses grow and create jobs and it can be paid for using the money left over from the Government’s failed scheme,” he said. “Up to 150,000 small businesses in the Yorkshire and the Humber region could benefit if they expanded.”

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A Treasury spokesman said the scheme was just one measure to help small businesses alongside cutting corporation tax, extending the small business rate holiday and reducing red tape.

He said: “Over 10,000 businesses have already been helped by the scheme, with these employers benefiting by an estimated £6m. But more businesses could benefit and HMRC has been working to increase this number.”

Comment: Page 12.