CAMBRIDGESHIRE Chambers of Commerce is calling on the Government to reconsider a proposed increase in national insurance contributions because of the risk of inhibiting growth in the region. The one per cent increase in NICs, scheduled for April 2011, sho

CAMBRIDGESHIRE Chambers of Commerce is calling on the Government to reconsider a proposed increase in national insurance contributions because of the risk of inhibiting growth in the region.

The one per cent increase in NICs, scheduled for April 2011, should be replaced by a one per cent increase in VAT, according to chief executive John Bridge.

The call comes following a national survey showing that three-quarters of SMEs believe the worst effects of the recession are not over for their business.

A third of the SMEs surveyed said that a VAT increase would be the least damaging to their business when compared to increases in national insurance contributions, corporation tax, fuel duty and capital gains tax.

More than one in five said they would absorb the cost of the increased NICs by limiting staffing levels, which would have a negative knock-on effect to the labour market.

Mr Bridge said the Government needed to offer incentives to businesses rather than costs.

"In particular, 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.

"The message from small business here is clear - that an increase in an employer's national insurance contributions would inhibit their ability to generate economic growth. Official figures may say we're out of the recession but for many the reality is very different."

Mr Bridge said the government could raise a similar amount of money by replacing the NIC increase with a VAT increase instead.

"According to the Treasury's 'Tax Ready Reckoner', raising VAT by just one per cent to 18.5 per cent would net the Government an extra £4.5billion in revenue. The one per cent increase in NICs, planned for 2011 would provide a similar sum, raising £5.1bn across the UK," he said.

"With these figures in mind, we would argue that the planned NICs hike should be scrapped, and substituted by a VAT rise coupled with targeted spending cuts.