Page last updated at 07:52 GMT, Thursday, 1 April 2010 08:52 UK

Business leaders back Conservative tax pledge

David Cameron: "There is a threat to the recovery from putting up National Insurance"

Bosses of some of the UK's biggest firms have backed Conservative plans to axe part of Labour's planned National Insurance rise if they win power.

The 23 - including Marks & Spencer's and Next's bosses - said the 1% NI increase would be a "tax on jobs" and would "endanger" economic recovery.

David Cameron called it a "significant" moment in the election campaign.

Labour called Tory plans an "unfunded promise" while the Lib Dems described them as "utterly unconvincing".

Ministers have argued that the tax-cutting pledge contradicts the opposition's long-standing position that reducing the UK's budget deficit should be the number one priority for the next government.

'Wrong time'

If they win the election, the Conservatives plan to scrap the planned April 2011 National Insurance rise for anyone earning less than £45,400 a year, which they say would save people £150 a year on average and also reduce the tax burden on firms.

Mr Cameron told BBC Radio 4's Today programme that halting the tax increase was not in conflict with his party's plan to cut Britain's record budget deficit.

Cutting government waste won't endanger the recovery, but putting up national insurance will
Letter to the Daily Telegraph

"We are finding savings in government spending in 2010, net savings of £6bn, which means we'll be borrowing £6bn less, and that allows us in 2011, having got public spending on a lower path, to stop this damaging tax rise that hits people earning over £20,000 and is a tax on jobs for every employer, on anyone earning over £5,700.

"And it is a significant moment in the election campaign - I think very significant, that the heads of these biggest companies, employing 500,000 people, have said, in terms, that cutting government waste won't endanger the recovery but putting up National Insurance will."

The endorsement of their position comes from a group of high-profile businessmen, including Marks & Spencer chief executive Sir Stuart Rose, Sainsbury's boss Justin King and easyGroup's Sir Stelios Haji-Ioannou.

Writing to the Telegraph, the business leaders said the proposed NI increase was an "additional tax on jobs" and would come into effect "at exactly the wrong time in the economic cycle".

'Counter-productive'

They also support the Conservatives' plan to pay for the move by cutting £6bn of government waste and bureaucracy in 2010-11 instead - an aspiration the Lib Dems say is totally unrealistic.

In the letter, the company bosses said they were responsible for ensuring their firms came through the recession in "good shape", and the NI rise would be counter-productive.

"In the past two years, businesses across the country have cut their costs without undermining the service they provide," the letter says. "It is time for the government to do the same."

Britain needs a serious deficit reduction plan, not Tory double-counting
Liam Byrne, Chief Secretary to the Treasury

It adds: "As taxpayers, we would welcome more efficiency in government. As businessmen, we know that stopping the National Insurance rise will protect jobs and support the recovery.

"Cutting government waste won't endanger the recovery, but putting up National Insurance will."

Reacting to the letter, Chief Secretary to the Treasury Liam Byrne questioned the Tories' ability to pay for the tax cut.

"We are already making the efficiency gains that the Tories claim will pay for their tax cuts," he said. "Britain needs a serious deficit reduction plan, not Tory double-counting."

Liberal Democrat Treasury spokesman Vince Cable said "of course" it would be desirable to avoid a rise in National Insurance, but added the problem was how to pay for it.

Mr Cable added: "What is utterly unconvincing about the Tories' proposals is that they rely on efficiency savings they themselves have ridiculed."

TV debate

The intervention of the business leaders comes just days before the likely start of the general election campaign, in which the twin tasks of sustaining the economic recovery and reducing government debt will be a defining issue.

BBC political correspondent Ross Hawkins says the businessmen - two of whom sit on the prime minister's business council - have an obvious incentive for opposing a tax rise that will cost their companies money.

FROM THE TODAY PROGRAMME

However, he added that their endorsement would be a boost for the Tories and their shadow chancellor George Osborne, as they seek to demonstrate the credibility of the party's economic plans.

In a three-way TV debate on Monday with Chancellor Alistair Darling and Mr Cable, Mr Osborne said the National Insurance rise was "the wrong priority" and would penalise companies.

But Mr Darling said the Tory tax cut would take a "terrible risk" with the recovery, while Mr Cable said the Tories' sums did not add up.

The 1p NI rise - applying to those earning more than £20,000 - is part of a £19bn tax-raising package which Labour says is necessary to meet its commitment to halving borrowing within four years.

The Conservatives have said they will go further and faster in tackling the deficit but have been accused of being vague about what this means and the degree of public spending cuts required.


The full list of signatories of the letter: Sir Anthony Bamford (JCB); Bill Bolsover (Aggregates Industries); Dominic Burke (Jardine Lloyd Thompson); Ian Cheshire (Kingfisher); Neil Clifford (Kurt Geiger); Mick Davis (Xstrata); Aidan Harvey (Tullow Oil); Lord Harris (Carpetright); Justin King (Sainsbury's); Sir Chris Gent (GlaxoSmithKline); Ben Gordon (Mothercare); John Lovering (Mitchells and Butler); Graham Mackay (SAB Miller); Alistair McGeorge (Matalan); Nicolas Moreau (Axa UK); Stephen Murphy (Virgin Group); Alan Parker (Whitbread); Sir Stuart Rose (Marks and Spencer); Paul Walsh (Diageo); Joseph Wan (Harvey Nichols); Simon Wolfson (Next); Zameer Choudrey (Bestway Cash and Carry); Sir Stelios Haji-Ioannou (easyGroup)



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