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National Insurance tax hike to hit UK apprenticeships, warns FSB

The Federation of Small Businesses (FSB) has called for the government to scrap its national insurance tax hike amid falling numbers of apprenticeships.

The UK’s largest business group has warned that higher employment taxes will discourage businesses, which pay the majority of national insurance contributions (NICs) for UK apprentices, from training workers. The number of people starting apprenticeships has already tumbled from 500,000 in 2017, before the introduction of the apprenticeship levy, to under 325,000 this year, the group warned.

“By looking again at its approach to NICs, the Government can make a real difference here – directly, by bringing down the immediate costs of taking an apprentice on, and indirectly, by freeing up more funds for recruitment and training at a moment when cash reserves are depleted,” said FSB chair Mike Cherry.

Cherry pointed out that the employment tax hikes are out of kilter with the government’s Levelling Up policy.

In an agenda published last week the government committed to increasing the number of people completing high quality skills training each year by 200,000, driven by 80,000 more people completing courses in the lowest skilled areas.

The FSB called for the government to reintroduce a £3,000 incentive for businesses to hire apprentices and to remove all employer NICs for apprentices in order to spur role creation.

“Small businesses disproportionately hire young people and those from disadvantaged groups when they create apprenticeships, so a targeted reintroduction of the hiring incentive that existed over lockdowns makes sense in the context of the levelling up agenda,” Cherry continued.

FSB’s latest Small Business Index revealed that the amount of firms citing lack of access to appropriately skilled staff as a barrier to growth has risen ten percentage points to 33 per cent this year, underscoring the importance of skills training.

National Insurance tax is due to rise by 1.25 per cent from April 2022 with the government claiming the additional money will be used to fund the NHS, health and social care in the UK.

The policy has faced additional criticism for squeezing incomes at a time when inflation stands at 5.4 per cent, its highest level for 30 years.