Battle over business tax

11 November 2008

The government and the opposition have clashed over just how to introduce the tax cuts that all parties now appear to be promising the electorate and business.

The Conservatives have put forward a plan that would see employers receiving a credit of £2,500 against National Insurance Contributions for hiring a new employee who had been claiming unemployment benefit for more than three months.

The Opposition said this would help 350,000 people back into work, as well as reducing the tax burden on business by £2.6 billion and saving as much in unemployment benefits.

However, the government attacked the proposal as an “unfunded tax cut”.

John Cridland, the deputy director-general of the CBI, said: “We know small and medium-sized manufacturers are cutting jobs for the first time during this crisis.

“While firms have to do what is right for their businesses in these challenging times, these imaginative proposals would help some small businesses keep people in work.”

But David Frost, the director general of the British Chambers of Commerce, was less convinced by the proposal.

Mr Frost said: “With unemployment continuing to rise sharply, companies are not in a position to think about recruiting new staff right now. Businesses are shedding staff.

“Cashflow is of primary concern to businesses at the moment. This policy announcement would have been a valid welfare to work initiative in better times, but it is not a survival tool for small businesses during a severe downturn.”