Treasury grossly overestimated NIC holiday take up rate

Contractor accountants may want to explain the National Insurance holiday scheme to their clients after the Treasury has admitted that it overestimated the amount of companies that would take advantage of it.

New start-ups get NIC relief on new employees but fewer than 3,000 firms have taken up the scheme. Originally, the Treasury estimated that 132,000 firms would be eligible for the relief each year.

A spokesperson for the Treasury said that the Office for Budget Responsibility scrutinised and certified the initial estimates. At the time it was stated that they were just estimates and it now appears that they were too high. However, the Department will learn lessons from the early take up rate of the scheme and try to increase it.

He went on to say that early indications suggest that a lot of those who did take up the scheme are benefiting from it and that it has increased both staff hiring rates and the prospects for future growth.

Willie Bain, the Labour MP for Glasgow North East, said it was extraordinary that the National Insurance holiday had had such a small impact on job creation, affecting only around 6,000 new starts.

He went on to point out that the coalition should be doing more to boost demand, particularly in the construction industry which has almost ground to a halt as government austerity measures have all but halted public sector construction of schools, hospitals and other buildings.

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