Almost one in three company directors believe they will employ fewer staff because of a new levy funded through higher rates of tax on National Insurance contributions and dividend payments, according to a report.
The Institute of Directors (IoD) said a survey of more than 600 of its members showed that although most supported the need to raise taxes to invest in health and social care, two out of three opposed the way it was being done.
“This research is a stark warning to the government of the impact that the National Insurance rate rise is likely to have on jobs,” IoD chief economist Kitty Ussher said.
“If, as they intend, three in 10 businesses decide to employ fewer people as a result of this tax change, the effect will be felt across the economy just at the time that the furlough scheme is ending.
“Since the March Budget, when the Chancellor announced a future rise in corporation tax, the economic bounce-back has brought in more tax than expected.”
Ussher added: “Rather than raising the cost of taking on staff through higher employers’ National Insurance contributions, he should be looking to support the companies currently suffering from skills shortages.
“The National Insurance rise is also undoubtedly a significant contributory factor in the sharp decline in economic confidence that we measured in our September Directors’ Economic Confidence Index.”
The news comes as The Federation of Independent Retailers (NFRN) warned that a rise to the national minimum wage and National Insurance contributions to fund social care could force local stores out of business.
The comment as the government announced a 1.25 per cent increase in national insurance contributions paid by both employees and employers.
with PA Wires