UK Government urged to rethink ‘tax on jobs’ due to impact on Scottish economy

The UK Government has been urged to reconsider its increase to employer national insurance contributions before it causes “lasting damage” to the economy in Scotland.

National insurance contributions for employers are set to rise to 15% from April – however, the Scottish Government estimates it will cost businesses £850 per employee on average.

It was warned the hike would hit the budgets of charities and public sector bodies.

Scottish Government Employment and Investment Minister Tom Arthur said the rise was likely to result in higher prices for consumers and endangered economic growth and described it as a “tax on jobs”.

Businesses now face the impossible choice of cutting jobs, reducing hours, cutting wages, absorbing the costs themselves or passing some of the burden to consumers in the form of higher prices.

Speaking ahead of a debate in parliament this week, Mr Arthur said efforts to support businesses and boost investment were “being undermined” by the UK Government’s decision.

Mr Arthur said: “This decision is hitting Scottish businesses hard, reducing their ability to contribute to Scotland’s economy, all while hurting employees’ pay packets.

“Businesses now face the impossible choice of cutting jobs, reducing hours, cutting wages, absorbing the costs themselves or passing some of the burden to consumers in the form of higher prices.

“The First Minister set out a clear plan for growth in his Programme for Government, using the levers at our disposal to support businesses and to attract investment in critical areas like the offshore wind supply chain.

“Yet, our efforts to support businesses, entrepreneurs and investment are being undermined by this tax on jobs. If the UK Government is serious about economic growth, they must reconsider this decision before they cause lasting damage to Scotland’s economy.”

A UK Government spokesperson said: “We delivered a once-in-a-parliament Budget in October to wipe the slate clean.

“That provided the stability needed across the UK, to kickstart economic growth through our Plan for Change.

“It also included more money than ever before for Scottish public services, with the Scottish Government receiving 20% more funding per person than equivalent UK government spending.”