Rise in National Insurance will hit public finances, Tories claim

More businessmen join protests against Darling's plan to increase ta

(DOMINIC LIPINSKI / PA)

The Conservatives increased the pressure on Labour over its decision to raise National Insurance contributions (NICs) yesterday by claiming that the move would land the public sector with a £690m bill.

As more company bosses joined the business community's rebellion against the 1 per cent increase in NICs for employers and employees in a year's time, David Cameron declared that Labour was now "on the wrong side" of both workers and business.

Thirty-eight bosses and seven organisations representing industry and commerce have now attacked the move and welcomed the Tories' plan to reverse the rise for all employers and people earning up to £35,000.

Stefano Pessina, executive chairman of Alliance Boots, said yesterday: "I believe this tax is not helpful at this time. Of course we have to sustain a positive momentum but we can see that the economic situation is not brilliant and we should not aggravate the problems that we face. The most important thing is to defend people's jobs for social and economic reasons.

"If companies are obliged to cut jobs because the Government charges a new tax then we will have a boomerang effect because people will not be able to spend, and this will exacerbate things."

Last night the Conservatives released calculations showing the impact of the NICs rise on the public sector as an employer would include £208m for the National Health Service, £74m for the civil service, £66m for teachers, £43m for police, £29m for the Armed Forces and £19m for quangos.

They claimed Labour's "tax on teachers' jobs" would pay for just under 2,000 teachers and just under 1,600 police officers, saying that the money could otherwise have been spent on frontline services.

Greg Hands, the shadow Treasury minister, said: "This week many of Britain's leading employers have backed the Conservative argument that Labour's tax on jobs will kill the recovery, but these figures show that it will also hit schools, hospitals and the whole public sector hard."

He added: "By taking immediate action on government waste to stop the most damaging part of Labour's tax on jobs, the Conservatives will save our public services hundreds of millions of pounds that will help protect and improve the frontline services that people depend on."

Labour has accused the Conservatives of a "cynical deception" after the Tories promised to raise the money to block the NICs increase from £12bn of unspecified government efficiency savings. It claims there is now a £22bn "black hole" in the Opposition's spending plans but its attack was blunted by the businessmen's intervention in the political debate as Gordon Brown prepares to call a 6 May general election on Tuesday.

Speaking during a visit to an east London youth centre with his wife Samantha, Mr Cameron dismissed Labour's warning that a Tory government would have to raise VAT. He said: "Our plans do not involve raising other taxes. What we are trying to do is avoid Labour's tax increases. We can't avoid all of them so we have chosen the one that is the most damaging to avoid and that's Labour's tax on jobs and Labour's tax that hits the people earning £20,000 and above. I don't think people earning £20,000 are rich. Labour apparently does."

The Tory leader said: "This is an impressive list of businesses. It was already but now we have got McLaren, we have got General Electric, we have got HMV – these are very serious businesses." Asked whether the Tories would need to raise NICs, he insisted: "I would put my faith in British business leaders who say the Conservatives have got it right."

Yvette Cooper, the Work and Pensions Secretary, accused Mr Cameron of hypocrisy over his praise for schemes to help the jobless find work during a recent visit to Liverpool. She said: "The barefaced cheek of David Cameron is breathtaking. David Cameron has opposed every single penny of the funding for the Future Jobs Fund, and his party has pledged to abolish it. Yet now he turns up telling young people that he thinks it is a 'good scheme'. If he is so keen to keep the Future Jobs Fund, perhaps he will share with the world how he would pay for it. And if he can't, he should stop making young people promises he doesn't intend to keep."