National insurance hike will exacerbate inflation and threaten jobs warns IoD

The Institute of Directors (IoD) has this morning released data suggesting that the government’s planned hike in National Insurance contributions will exacerbate inflation and threaten jobs.

Former Conservative Cabinet Minister David Davis MP warned earlier today that April’s scheduled rise in National Insurance contributions would add to the pressure on household finances.

In September the government broke its manifesto pledge not to increase national insurance as MPs voted to raise NI by 1.25 percentage points.

The IoD’s new figures conclude that the tax rise also presents little option to businesses but to raise prices further.

When asked how they planned to respond to the rise in employers’ National Insurance contributions, nearly four in ten (38%) business leaders stated that they would “raise prices to offset some or all of the cost”.

There will also be pressure on jobs, with around one in five firms (19%) saying they would “employ fewer people”. More respondents said they would reduce investment (15%) than said they would increase investment in technology (10%).

Kitty Ussher, Chief Economist at the IoD, said: “The forthcoming rise in employers’ National Insurance contributions is of real and genuine concern to business leaders, particularly those running small and medium sized businesses that are the growth engine of our economy.

“Our data shows that the tax rise is itself inflationary at a time when prices are already rising fast. Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans.”