Dated: 8 April 2010

Has business been ‘deceived’? No.

• The IoD and other business organisations have been arguing against the proposed NIC hike since it was first announced in last autumn’s Pre-Budget Report, long before the Conservatives announced their policy.
• We welcome the fact that the Conservatives have now decided to support a reversal of the hike, but they are ‘late to the party’.
• Business has taken a view on the need for a reversal of the NIC hike without influence from political parties and has been deceived by no one.

This is a small business issue, not just a big business issue

• While the IoD welcomes the fact that many leaders of large corporations are now supporting the reversal, this should not obscure the fact that this is an issue for businesses of all sizes.
• In a survey of 1,800 IoD members conducted in March, 43% said that the rise would discourage them from taking on new staff.
• In the same survey of 1,800, 76% thought the rise would be negative for the economy.
• 80% of the 1,800 are directors of small and medium-sized businesses.

Will the reversal ‘take money out of the economy’? No.

• Far from taking money out of the economy, a reversal of the NIC hike would leave resources in the hand of businesses which will then be able to use those resources to increase business investment and create new jobs.
• Instead of hitting firms with a tax rise when the economy is fragile, the Government should be encouraging firms to grow so that tax receipts on business profits rise.

The NIC debate is unreal because it avoids the big issue which is excessive Public Sector spending

• Instead of hitting struggling businesses and employees with a tax rise before the recovery is established, the Government should be outlining how it plans to achieve spending reductions on a scale big enough to tackle the deficit.
• This is not a choice between tax rises or cuts to frontline public services – of course cutting spending will involve some tough decisions, but we have set out how £50 billion a year can be saved without hitting key front line services.
• To read our report on how £50 billion can be saved please click here.

Commenting Miles Templeman, Director-General of the Institute of Directors, said:

“A reversal of the NIC hike, instead of ‘taking money out of the economy’ as some economists and politicians claim, would allow businesses to use those resources to increase business investment and create new jobs. Overtime this will help public finances far more than this tax rise, because we know that business growth will translate into ever higher tax receipts for the Treasury.”

“Clearly we need to get the deficit down quickly, but the way to do that is to grasp the nettle on Public Sector spending, not with tax hikes on business. Of course cutting spending involves some tough political decisions, but these will have to be taken sooner rather than later. The narrow debate on NICs suggests that most politicians have yet to understand this point or at least communicate it to voters.”