From the TUC

New data on national insurance holiday reveals it has been a total failure

20 Dec 2011, by in Labour market

New data on the operation of the Government’s National Insurance Holiday Scheme has now been laid in the House of Commons library.  When this scheme was announced, it was estimated that over three years 400,000 new businesses would benefit by having a lower tax bill from employing new staff and that 800,000 new jobs would be created.

Today’s data reveals that over the first year of its operation 3,345 employers have taken advantage of the scheme (1% of the total anticipated number) and that the NICS holiday has been claimed for 12,411 employees (2% of the anticipated number of jobs).

What’s more in the region that currently has the highest unemployment rate (the North East where unemployment is 11.7%) only 587 employers have used the scheme, supporting 571 jobs.  To put this in some context over the same period of time the unemployment level in the NE has risen by 24,000 and the employment level has fallen by 23,000.

Far from “ensuring all parts of our country contribute to a more balanced and sustainable economic future” this scheme has created barely no jobs – as we predicted at the time. But with unemployment now at 2.63 million there is no pleasure in saying we told you so.

2 Responses to New data on national insurance holiday reveals it has been a total failure

  1. Supply side reforms just don’t work when it comes to creating jobs » Tax Research UK
    Dec 21st 2011, 9:18 am

    […] my  TUC colleague Nicola Smith has noted on the Touchstone blog: New data on the operation of the Government’s National Insurance Holiday Scheme has now been […]

  2. Frances Coppola
    Dec 21st 2011, 5:20 pm

    Nicola, a sensible and balanced post. This programme is a misguided attempt to stimulate the private sector through tax incentives when businesses simply aren’t interested in expanding because of lack of anticipated demand and worries about the economy, particularly in the light of the Eurozone crisis. Businesses are not short of cash – in fact they are sitting on historically unprecedented cash balances. If they wanted to employ people they already have the means to do so, so short-term tax breaks are hardly going to help. The Government has got it wrong.

    I’m commenting here on Richard Murphy’s response to this post, because he deletes anything I put on his blog.

    Supply-side reforms of this kind do work when conditions are right for them. But as Richard Exell pointed out on the earlier Touchstone post, they don’t work when the economy is suffering from lack of aggregate demand and business confidence is at an all-time low. Supply-side reforms work when demand is recovering and production needs to increase in response – indeed I would argue that supply-side incentives are essential under those circumstances to counteract the inflationary effect of increasing demand and static production. I have long argued that the Chancellor initially misread the state of the economy and designed a programme of public sector restraint and supply-side reforms which would be appropriate in a recovering economy, but are not appropriate in an economy where the preference of the private sector (households and corporates) is for deleveraging and hoarding. The declining economic performance we are now seeing is in part a consequence of those inappropriate policies. But to argue that supply-side reforms don’t work, and that only the public sector can create jobs, is going too far. Both public and private sector can create jobs. Neither is choosing to do so.