National Insurance holidays: A solution to the jobs crisis?

A popular initiative unveiled in Osborne's Emergency Budget last June (yes, there were a few) was the NI holiday for new businesses set up outside of London, the South East or the East of England (although naturally we would have liked to see it apply to all new firms).

As of last June, start-ups in qualifying regions have been exempt from NI payments for the first 10 employees hired. However, the Federation of Small Businesses (FSB) is now calling on the government to extend this NI holiday to existing firms.

Of course, all businesses would welcome a NI holiday, but the FSB believes this is a legitimate way of tackling unemployment, which has spiked unexpectedly, the latest figures released by the Office for National Statistics revealed today.

And the FSB is backing up its claims with research. The organisation's 'Voice of Small Business' Index found that the number of small firms looking to take on new staff fell from 12.2% in the third quarter of 2010 to 8.7% in quarter four. Some 12% are looking to cut staff in the first quarter of 2011.

Further research found that 44% of small businesses would take on more staff if the government cut National Insurance, and this measure would "create an environment that helps small businesses grow and develop".

The organisation has compiled these findings into a report, entitled: 'National Insurance holiday for new jobs in small businesses', which calls for the government's NI holiday to be extended to existing businesses with up to four members of staff that take on up to three new employees, in a bid to stem the rising level of unemployment.

The total number of unemployed people increased by 44,000 in the three months to December 2010 to hit 2.49 million, today's ONS stats revealed, while the number of out of work 16-24 year olds rose by 66,000 to 965,000 - the highest figure since records began in 1992. As a result, the number of people out of work and claiming Jobseeker's Allowance rose by 2,400 in January, to hit 1.46 million.

Meanwhile, wages have fallen to a five-month low, and those in work are now facing an effective pay cut as figures reveal that inflation hit a two-year high of 4% in January - double the government's target - hitting consumers' spending power.

The FSB believes the beauty of its proposal is that not only would it create new jobs - potentially taking people off state benefits - but the Treasury would also benefit further through income tax and employees' NICs from the new staff.

"Unemployment is worryingly high and with inflation above target, small firms cannot rely solely on the consumer for growth," said John Walker, national chairman of the FSB. "We know that small firms would take on more staff if National Insurance was cut, so to really help boost employment in small businesses, the government must extend the NICs holiday to existing small firms.

"As we have heard time and again, the government is looking to the private sector to lead the recovery, but without the right measures in place, small firms are left without the tools they need for the job at hand."

What do you think of the FSB's idea? Would a NI holiday encourage you to take on more staff? Tell us below.

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