NI increase 'is a tax on jobs'

GORDON Brown claimed that his Budget will help to create 'a more enterprising Britain'. In reality, most of the Chancellor's measures were simply a re-heated version of last year's - and business leaders said that any benefit would be wiped out by National Insurance increases.

Nick Goulding, chief executive of the Forum of Private Business, said the NI hike was a 'sickener' that would cost firms £2bn. 'It is a tax on jobs and a disincentive to employ,' he added. The FPB calculates that a firm employing 100 will face an extra cost of £23,607.

Two genuinely new moves were cutting the rate of corporation tax for small firms from 20% to 19%, and reducing the 10% starting rate to zero for those with profits below £10,000. Accountants dismissed these measures as a 'gimmick'.

BDO Stoy Haywood said the 1% reduction would save no more than £1m of tax for 333,000 businesses, or just £3 per firm.

Brown's reform of the VAT rules was announced in last year's Budget. Then, he said firms with a turnover of up to £100,000 a year will be able to pay a new flat VAT rate, instead of the huge administrative burden of accounting for every item. The threshold will be raised to £150,000 from April 2003.

His concessions to companies brave enough to buy premises in the most deprived areas of Britain are also an extension of existing measures.

Since November, firms have been exempt from duty on purchases up to £150,000. The Chancellor is now proposing to abolish the duty on purchases in deprived areas altogether.

Tom McGinness, of KPMG, said most of the cost of funding the NHS was falling on business through the NI increase. 'This does not encourage entrepreneurs and could deter overseas investment,' he added. Mike Warburton, of Grant Thornton, said: 'This is a Budget of give and take for small firms - with the emphasis on the take.'