News

October 12, 2012

FSB lobbies Government to extend the NIC holiday for micro-firms

The Federation of Small Business (FSB) is calling on the Chancellor, George Osborne, to look at a proposal to extend the National Insurance Contributions (NICs) holiday to all micro-firms.

According to new research from FSB, if, over a two-year period, the NIC holiday scheme were to be opened up to all micro-firms across the UK, it would add 45,000 jobs and £1.3 billion in GDP.

FSB is proposing that this could be implemented when the current scheme ends in September 2013 and run until the end of the Parliament in 2015. 

The current NICs scheme, which Government gave £800 million to fund, gives new businesses outside London and the south-east and east of England a break in paying National Insurance for up to ten new staff they take on. So far, only 15,000 firms of the projected 200,000 have used the current holiday scheme, in place since June 2010.

Previous FSB research has shown that payroll taxes, such as NICs, are a major barrier to hiring. One in four respondents to a recent FSB survey said this was a major factor. However, more than half (53%) said that a NICs holiday would encourage them to take on staff.

The research estimates that the scheme could be implemented UK-wide for around £500 million — less than the current budget for the scheme — when the wider economic impact of getting people into jobs, paying income tax and having disposable income is taken into account.

John Walker, FSB national chairman, said: "The National Insurance Contributions holiday is the Government's flagship policy to boost employment, but it hasn't anywhere reached the levels that were predicted. Extending the scheme will involve a financial outlay by Government, but having more people in work will increase tax revenues in the long run as more people are paying tax than receiving help from the state through Jobseekers Allowance, for example. Not just that, but getting people into full time work will mean they have more money to spend increasing revenue from VAT."