Government scheme axing job cuts

Government figures show over 6,000 redundancies are possible over the next year as the flagship National Insurance scheme ends. Uncertainty over the future of corporation tax despite Brexit uncertainty are among the reasons for…

Government scheme axing job cuts

Government figures show over 6,000 redundancies are possible over the next year as the flagship National Insurance scheme ends.

Uncertainty over the future of corporation tax despite Brexit uncertainty are among the reasons for job losses, although a study of job adverts suggests they are being replaced with additional roles.

However, some of the firms involved in the redeployment are concerned they will be looking to replace these with lower-paid positions without enough specialist skills.

The Strategic Employers Board is looking at the problems to try to help people affected.

Figures from the Department for Business Innovation and Skills show that 575,000 people received a National Insurance discount on PAYE in 2017, but by March this year this had fallen to 478,000.

In February this year the government scrapped the discount for new business owners, meaning the 575,000 workers – and many more firms – will have no deduction from their taxable income in the next year.

This has prompted employers to move people over to make sure they remain exempt from National Insurance Contributions (NICs) for the two years necessary for the business to be operational.

The figures showed nearly 900,000 people were expected to benefit over the two-year transitional period but because many workers already receiving a discount were likely to have chosen to stay with their employers in the interim, this may have reduced the number of employees affected.

However, 6,451 people could still be affected.

Of the remaining 6,141, 656 are self-employed, 52 are employees of the public sector, 23 are in small businesses and 521 are in large firms.

Sarah Newton, chief secretary to the Treasury, said National Insurance was meant to be only a back-up tax when people did not have the skills needed, or the capacity to do the job in the first place.

She added: “I’m not interested in doing further harm to high street shops. People are here because they believe in their company, they want to see it grow and grow.

“People are being given the choice to move on and get a training place if they do not think they are going to get the specialist skills to move forward.

“We have done something like three million apprenticeships in the last eight years and this government is not going to just let millions of people leave the labour market because we lost a multi-billion pound insurance loophole.”

Julian Totteridge, who is coordinating the government’s response to the problem and is a senior policy adviser for the Confederation of British Industry, said businesses understood that value and they understood they need to help people.

He said: “If we can avoid people actually leaving the labour market unnecessarily then it is not so much a matter of whether they should have been doing the tax savings – there is a compelling case for that – as to how the government could mitigate the impact of the notional loss of a little extra funding to companies.”

Mr Totteridge said there were alternatives to National Insurance and other tax credits and training allowances that were “much more effective” at supporting people.

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