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National Insurance holiday should be extended to all micro-firms, says business group

The Government's 'flagship' policy offering a National Insurance Contributions (NICs) holiday to new businesses that meet a strict criteria should be extended, the Federation of Small Businesses (FSB) claims.

The NIC holiday scheme saw less than 14,000 businesses take-up between its launch in September 2010 and March 2012, despite a Government target of 400,000 businesses by September 2013 and an £800 million investment.

But these statistics could be improved if the scheme was extended to all micro-firms in the UK-firms with less than 10 employees- says the FSB. As the scheme currently stands, only new businesses set up outside London, the South East and East of England are eligible for an NIC holiday of up to £5,000 for up to the first 10 employees hired during their first 12 months.

In fact, the FSB claims that a move to extend the scheme to all UK micro-firms would add 45,000 new jobs and £1.3 billion in GDP to the UK's economy. This is compared with 27,000 jobs and £700 million in GDP if it were extended to all businesses in the scheme's current limited area.

The FSB is calling for Chancellor George Osborne to look at its proposals at the Conservative party conference in Birmingham this week. Commenting, John Walker, National Chairman at the FSB said:

"The National Insurance Contributions holiday is the Government's flagship policy to boost employment but it hasn't anywhere reached the levels that were predicted. The weak economy and fragile business confidence caused by the return to recession means that start ups haven't taken on staff as quickly as they might have done had the economy been stronger.

"Extending the scheme will involve a financial outlay by Government, but having more people in work will increase tax revenues in the long run as more people are paying tax than receiving help from the state through Job Seekers Allowance, for example. Not just that, but getting people into full time work will mean they have more money to spend increasing revenue from VAT."

Meanwhile, speaking on Radio 4's Today programme over the weekend, George Osborne indicated that the Government intends to finish the job it has started of bringing the deficit down by increasing taxes on the rich and making further savings in the welfare budget. More is expected to be revealed at the Conservative party conference this week.