New regulations and tax rises could 'risk' recovery

19 January 2010

The ability of firms to create jobs and to spearhead the economic recovery could be jeopardised by a “blizzard” of new business regulations and tax increases, it has been claimed.

According to research carried out by the British Chambers of Commerce (BCC), business rules and taxes due to be introduced over the next four years will cost UK firms some £25.6 billion.

Eight changes alone are planned for 2011, the BCC said.

Estimates suggest that over half of the additional costs – £14 billion – will be accounted for by the 1 per cent rise in national insurance contributions that comes into effect in April 2011.

Other expensive changes include the new compulsory pension scheme that is to be phased in from October 2012, which, the BCC argued, will impose a further £4.8 billion in employer costs.

The Agency Workers Directive (2011) will clock up annual recurring costs of £1.5 billion, while this year’s Equality Bill will add a one-off £190 million to business expenses, the BCC added.

The BCC conceded that pension reforms were important but went on to suggest that the introduction date be reviewed depending on economic conditions and that the schemes themselves should shoulder more of the administrative burden.

The Agency Workers Directive would not only mean extra costs, the business group said, but would also compromise the UK’s flexible labour market.

Given the extent of the forthcoming laws and tax rises, the BCC said that it wants a three-year moratorium on all new employment legislation.

This would allow the upcoming regulations to bed-in, promote job creation and help drive economic recovery.

The business group is also seeking a government-backed campaign that would extend the moratorium to EU regulations.

David Frost, the director general of the BCC, commented on the survey: “The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive our economic recovery.

“What must not happen after a general election is that a new government - from whatever party - comes to power and decides to add to this already sizable burden on business.

“From what employers tell me, they will get on with creating jobs and wealth, but they simply need government to get off their backs and let them do it. A good start would be to abolish the planned increase in National Insurance in 2011 – it’s a tax on jobs and will hinder recovery.”