Political row over National Insurance rises intensifies

(REUTERS/Andrew Winning)

The political row over National Insurance rises intensified tonight after business leaders dismissed "patronising" claims that they had been fooled into backing the Tories' plans.

Business Secretary Lord Mandelson accused the Conservatives of "peddling a deception" after 23 senior figures endorsed moves to curb the Government's NI hikes.

And Chancellor Alistair Darling suggested the businessmen had accepted "flimsy advice" rather than considering the issues properly.

But two of the signatories to a joint letter to the Daily Telegraph hit back immediately, saying the Government was levying a "tax on jobs".

Next boss Simon Wolfson said in a statement: "Of course we have not been deceived.

"The principle is a very simple one. It is question of do we pay for government profligacy through increased taxes or do we urge them to save money in a way that businesses have."

Kingfisher chief executive Ian Cheshire said: "It's a little patronising to suggest that we've been deceived.

"This isn't a political point, it's a business issue - whichever way you look at it, it's a tax on jobs."

They were backed by former trade minister Lord Digby Jones, who berated Lord Mandelson for turning the letter into a "political spat".

"I think Peter Mandelson got this wrong," the ex-CBI chief told BBC Radio 4's World At One. "Instead of saying well, actually, maybe we should not be doing the employer NI contributions bit, maybe we should be tightening the budget another way - maybe not the way the Tories say, maybe the way the Tories say - instead of that, he turned it into a party political spat.

"What is a crying shame is that this is about people's jobs at stake as we come out of a recession. It shouldn't be about who can claim support."

Among the other prominent business leaders who signed the letter to the Daily Telegraph were Sir Stuart Rose of Marks & Spencer, easyJet founder Sir Stelios Haji-Ioannou, Sainsbury's chief executive Justin King, JCB chairman Sir Anthony Bamford, and GlaxoSmithKline chairman Sir Christopher Gent.

They wrote that a Tory commitment to reverse the bulk of NI rises for employers and staff - scheduled to take effect next April - would "protect jobs and support the recovery".

Another open letter was issued later by business groups including the British Chambers of Commerce, British Retail Consortium and Confederation of British Industry.

"Recent proposals by the Conservatives to reduce the negative impacts of the rise on companies and their hard-working employees deserve some credit," the missive stated.

Conservative leader David Cameron welcomed the interventions as "a very important moment in the election campaign".

"They are saying there is no threat to the recovery from cutting waste in 2010 but there is a threat to the recovery from putting up National Insurance contributions," Mr Cameron told BBC Breakfast.

But Labour ministers delivered a bullish response at a press conference in Westminster.

Mr Darling said shadow chancellor George Osborne's plans to reverse the bulk of the NI rises scheduled for next April were based on £6 billion of "illusory" efficiency savings.

"My guess is that these senior businessmen did not get where they are today by accepting such flimsy advice," said the Chancellor.

"At the coming election, the Conservative Party wants to face two ways - promising extra tax cuts and spending commitments while at the same time claiming they will reduce the deficit further and faster than our plan to halve it in four years."

Lord Mandelson said: "Of course there will be some in business who are going to support what appears to be a pain-free tax cut. Who wouldn't if offered that? But the point is this is not pain-free."

He added: "Mr Cameron and Mr Osborne are peddling a deception on businesses up and down the country and on the British people, and it's one that they are aware of.

"Remember, it was George Osborne who said you cannot cut tax based on cutting red tape. It used to be a cardinal principle of the Tory leadership.

"The truth is that this is a cynical deception."

Labour published a dossier accusing the Tories of proposing £22 billion worth of unfunded promises, and warned that the Opposition would increase VAT and "butcher" public services.

"We know the age-old Tory tax hike is a VAT increase," Lord Mandelson said.

"It is almost impossible to see what else the Tories would use to pay for their unfunded promises."

Liberal Democrat leader Nick Clegg also attacked the Conservatives, branding them "the party of funny money and sums which don't add up".

"They promise a deficit reduction without telling us how they are going to pay for it. They promise increases in public services without telling us how they are going to pay for it.

"Now they promise stopping the rise in National Insurance without spelling out how they are going to pay for it."