Employers spared from 1% National Insurance rise

The new coalition Cabinet will sit down for the first time today. (Photo by Chris Ison/WPA Pool/Getty Images)

Employees still to face increase but retailers will not have to match.

The new Conservative-Liberal Democrat Government has announced that employers will be spared from any rises in National Insurance contributions.

Labour’s planned 1 percent rise in National Insurance contributions will go ahead in April 2011, but only employees will face an increase, not employers.

When Labour first announced plans to increase National Insurance contributions by 1 percent the British Retail Consortium (BRC) estimated that should employers have to match the rise it would cost the industry an extra £220 million. BRC director-general Stephen Robertson claimed that the increased costs would make it too expensive for retailers to create new jobs.

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At the time, Robertson said: “This is a tax on jobs. It would make it more expensive for retailers to employ people, undermining their ability to maintain and create jobs and preventing them maximising their contribution to the recovery."

The new Cabinet will sit down for the first time this morning and there are still many areas of policy to be ironed out, including a potential VAT increase. A survey of leading economists conducted by the BBC has shown that 24 out of 29 economists questioned believed that VAT will rise from 17.5 percent to 20 percent before the end of 2011.

A change in VAT would be a costly expense for retailers. The reduction in VAT before Christmas was met by scepticism from many in the trade who did not believe the cut boosted shopping by enough to justify the costs of readjusting stock pricing.

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