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Monday 10th of January 2011
April 5, 2010    

Labour defend National Insurance rise

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by Kay Murchie

Chancellor Alistair Darling has been forced to defend Labour’s planned rise in National Insurance (NI) contributions after the Conservative Party said the hike would lead to job losses.

Last month’s Budget confirmed that the Labour Government will raise National Insurance contributions by a further 0.5% from next year, on top of the 0.5% rise announced in 2008.

However, the Conservative party have said avoiding the increase in NI contributions will be top priority if they are successful in this year’s general election.

The increase will apply to everyone earning over £20,000 but the Tories have said they plan to scrap the increase altogether for everyone earning under £35,000. However, weekly thresholds will be increased to offset the impact of the tax rise.

The pledge by the Tories has received support by 37 of the country’s most senior businessmen, including executive chairman of Marks and Spencer, Sir Stuart Rose, and easyJet entrepreneur Sir Stelios Haji-Ioannou, who last week signed a letter, which was published in the Daily Telegraph.

The Tories say Labour’s actions would be a tax on jobs but Mr Darling denied this was the case on BBC Radio 4′s Today programme today.

“The last time NI went up was in 2002… employment after that went up,” he said. “Why? Because the economy was growing after that. Now if you look at the Budget overall and you look at what we are doing in terms of supporting the economy and the other measures to help businesses and so on, we believe that employment is going to start to grow.”

The Labour Government introduced the rise as part of plans to cut the UK’s deficit and the increase received the support of the Institute of Directors.

The Chancellor has raised concern that if the Conservative party win the general election, they will find other ways to cut the deficit and will cut it sooner than current plans.

Mr Darling has warned that the economic recovery is still too fragile warned that cutting the deficit too quickly could pose a threat to the recovery.

He said: My concern is though, if you look at what the Tories are saying, if you take money out of the economy now, in a year when we are beginning to see recovery, we are coming through it, that is taking a great risk.”

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