NI hike to destroy Scots jobs

Published on Saturday 28 September 2002 01:00

SCOTTISH business groups yesterday hit out at Chancellor Gordon Brown after a startling new report revealed that more than half of all manufacturers plan to axe jobs to cope with higher National Insurance contributions.

Peter Hughes, chief executive of Scottish Engineering, said manufacturers had been left with little choice but to make redundancies as he published the results of a UK-wide investigation into the 1 per cent hike in employers’ NI contributions.

Some 53 per cent of manufacturers said they intended to reduce their workforce when the tax comes into effect in April. About one-third said they would respond by moving costs abroad.

Hughes said: "At the end of the day, what the Chancellor has done in his Budget is put a tax on jobs.

"If your labour costs are going up and you have no room for manoeuvre elsewhere, you’re going to cut jobs. And this is money which should be going into investment."

He added: "We’re seeing this message right across the board in Scotland: in the defence sector, in mechanical engineering, in electronics. I can’t find any exception."

More than half of all manufacturers say they will pay for the NI increase by reducing future wage rises, while one-quarter of employers intend to slash contributions to pensions.

The impact will weigh heavily on a sector that has already axed more than 150,000 jobs across the UK in the past year. Producers are struggling to comes to grips with a year-long recession, and Hughes said the NI hike would accelerate the pace at which employers were shedding jobs.

Hughes conceded that it was unlikely that Brown would reverse his decision to raise employers’ NI contributions, but he called for greater restraint in future tax decisions.

He said: "I ask the Chancellor to be sensible for once in the oil and gas sectors. We’re already seeing the effects of his 10 per cent tax on North Sea profits as projects are altered and scaled back. We’ve got idle oil rigs stacked up at record levels."

About 30 per cent of companies said they have yet to decide how to pay for Brown’s NI hike. More than 1,000 manufacturers were polled for the report by the Engineering Employers’ Federation.

Martin Temple, director general of the EEF, said: "The survey confirms our worst fears about the effect of yet another cost, on top of rising insurance premiums, increased pensions and the climate change levy."

He added the government is "playing a very dangerous game" with manufacturing jobs and the sector’s future competitiveness.

Manufacturing in Scotland has suffered a triple whammy in the past 12 months of NI tax hikes, new energy taxes, and an extra 10 per cent levy on profits from the North Sea.

Responding to the EEF report, a spokeswoman for HM Treasury said: "The NI contributions will pay for improvements to the health service, which will benefit companies through healthier staff and increased productivity."