George Osborne is to announce further savings at the Tory conference
The Conservatives have announced a tax break plan for firms created in the first two years of a Tory government that they say would create 60,000 jobs.
Shadow chancellor George Osborne said an exemption on employers' National Insurance on their first 10 staff would be funded by savings to be announced.
Labour said the tax break was a "gimmick" while the Lib Dems said it would "undercut" existing companies.
It comes as David Cameron unveiled plans to get people back to work.
Speaking at the Conservative Party conference in Manchester, Mr Osborne said the National Insurance measures would be "a huge boost to enterprise".
He added it would send the message: "Invest here, set up your business here, come and make your enterprise here and we will support you. We will send a message loud and clear that this country is open for business."
Aides said the exemption would apply to the first 10 employees hired by a business during its first year, up to an earning limit of £844 a week per employee, or about £44,000 a year.
For a new small business with 10 employees on an average salary of £25,000, Mr Osborne calculates this could save up to £25,000 a year.
The bills are racking up. George Osborne must tell us how he'll pay for them all."
John Cridland, head of the CBI business group, welcomed the proposal saying: "Many business people are put off hiring their first employee by the sheer level of taxes and red tape, particularly at this time.
"This proposal should help new firms take bolder steps in creating jobs, and would give a much-needed boost to UK entrepreneurs looking to grow a business."
And the Federation of Small Businesses said it would help to create and grow more small businesses to serve as "a catalyst for economic recovery".
But Labour said it was not clear how the tax break would be paid for.
The bills are racking up," Chief Secretary to the Treasury Liam Byrne said. "George Osborne must tell us how he'll pay for them all."
Work and Pensions Secretary Yvette Cooper said: "The Tories still want to make cuts in a recession that would destroy jobs and, according to respected economists, would actually push unemployment up to five million.
"They are simply rehashing Labour policies without the investment needed to make them work."
Vince Cable, the Lib Dems' Treasury spokesman, said: "The numbers Mr Osborne thinks this policy would help seem to have been plucked out of thin air.
"Many small businessmen will be shocked to learn that the Tories believe a start-up business has a wage bill of £250,000.
"What is most worrying is that this tax break for new businesses would mean that they will be able to undercut existing small companies who are already struggling."
The Tories' European policy has also been under scrutiny on the first day of the party conference in Manchester, after a second Irish referendum endorsed the Lisbon Treaty.
Cameron on 'discredited and clapped-out ministers'
But Mr Cameron did not address Europe in a brief speech to the conference to launch what he described as "the biggest, boldest programme to get Britain working that this country has ever seen".
He outlined plans for a welfare shake up to get many incapacity benefit claimants back to work, which could see them lose £25 a week in state help.
Other proposals included a chain of technical schools in English cities; 10,000 new university places, and a boost to apprenticeship schemes.
Meanwhile, inventor Sir James Dyson was named the party's technology tsar and will lead a taskforce to explore ways to boost hi-tech exports.
The Tory leader, who will make his keynote speech on Thursday, said Labour was "tired, discredited and clapped-out".
But warning members against complacency he said: "We need a strong and positive mandate for the changes we know our country needs and we know people are crying out for."
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