Business groups want National Insurance rise scrapped

Business groups have written to Lord Mandelson about National Insurance

Two business groups have urged the government to scrap next year's National Insurance increase because it may endanger the economic recovery.

The 1% rise is central to government plans to cut the budget deficit.

The British Chambers of Commerce and the Chartered Institute of Personnel and Development (CIPD) have written a joint letter to Lord Mandelson.

They say business will suffer from the extra financial burden which will hit any upturn in the labour market.

Young unemployed

A survey by the CIPD shows that more one in 10 employers predicts the increase will make them recruit fewer staff.

Just under one in 10 goes further and says it will make them cut jobs. The British Chambers of Commerce estimates the extra cost to employers of the rise will be £14bn over four years.

They say it must be scrapped because it is little more than a tax on jobs.

BBC employment correspondent Martin Shankleman says both groups also call for the government to freeze the minimum wage for young people next year.

They say any rise would be absurd when a million youngsters are out of work, our correspondent added.

Chancellor Alistair Darling has announced two 0.5% increases in National Insurance which will both take effect in April 2011, one in his 2008 pre-Budget report and one in 2009.

The 2009 announcement was attacked at the time by the CBI business organisation as an "extra tax on jobs" which would harm the UK's recovery.