NI debate is red herring, says IES

Date: 29th April 2010

The debate about the impact National Insurance contribution (NIC) rises will have on the UK has been described as a "red herring", by one expert.

Nigel Meager, director at the Institute for Employment Studies (IES), said the impact on jobs is "likely to be small".

Mr Meager explained that while businesses dislike increases in payroll taxes, a rise in NICs is more likely to have an impact on employees as companies will attempt to keep wages down in a bid to recoup their costs.

"The ultimate effect will depend entirely on how the extra revenue raised through the NIC increase is spent," he said.

"Conceivably, if it finds its way into the pockets of people on lower incomes who tend to spend most of those incomes, it could even lead to more jobs through the effect on consumption and demand."

The comments follow the publication of a report from the Chartered Management Institute, which showed that a number of businesses are still feeling the effects of the recession.

According to the study, 41 per cent of managers feel their businesses are still "severely hampered" by the economic downturn, while 63 per cent reported a downturn in morale.

Posted by Jacob Williams