CIPD welcomes Conservative plan to scrap NI increase

Conservative plans to scrap the scheduled National Insurance rise for low earners have been praised by the CIPD.

The Chartered Institute for Personnel and Development (CIPD) and the British Chambers of Commerce warned the government in January that the planned 1% hike in national insurance contributions – confirmed in last week’s Budget – would put employers off hiring new people and make it more difficult for firms to emerge successfully from the recession.

However, shadow chancellor George Osborne has promised to scrap the increase, dubbed a “tax on jobs” by the CBI, for low earners.

John Philpott, CIPD chief economic adviser, said: “George Osborne’s proposal to cut much of the government’s hike in employer’s national insurance contributions shows that he has wisely listened to British business.

“The CIPD welcomes Osborne’s move, accepting that it would be difficult for him to cancel the planned increase in full. The move will be good for jobs.”

Should the Conservatives win the general election, expected on 6 May, Osborne said he would pay for lost tax from National Insurance contributions by scrapping some projects in this financial year and making efficiencies elsewhere, such as by improving procurement.

Osborne also said the Tories had identified £12bn of cuts from Whitehall, half of which could be made during 2010-11, with the rest during 2012-3.

Last week Labour pledged to cut £11bn from Whitehall, the NHS and police budgets by 2012-3.

Philpott said: “The case for and against immediate action to reduce the fiscal deficit may be finely balanced but with the economic recovery still very weak and potentially fragile, Osborne is in this respect clearly taking a gamble on growth and employment.”

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