National Insurance Contributions Bill

Memorandum submitted by East London Small Business Centre (NI 04)

About East London Small Business Centre

We are a London-based, not-for-profit organisation (Social Enterprise ) for small businesses. We are committed to helping anyone who wants to get started in business unlock their entrepreneurial talent. We support existing businesses to grow, expand and be sustainable. Since 1978, we have supported over 15,000 businesses start-up and develop across east London . We positively support enterprise in the most deprived areas in east London with: free business training, one-to-one business counselling and loans of last resort.

Our concentration in selected boroughs within east London ensures that we focus our resources and knowledge base for the benefit of disadvantaged and sometimes marginalised individuals of the community. The five boroughs we cover have the highest unemployment rates in London, and as such our work has focused on tackling worklessness through creating jobs with every new business we support, while helping existing businesses survive during the economic downturn and retain their staff, through one to one business support and loan funding when their banks said no or no more.

Last year, at a time when London’ s unemployment level was on the increase, we helped over 300 new businesses to start-up, which in turn created over 400 new jobs into the local community.

Tim Heath, Chief Executive, was unable to give evidence to the committee in person due to being snowed in at Colchester. He would have made the four following points:

1 This bill discriminates on an arbitrary way of regions (which I thought the new administration was abolishing?) for helping new businesses be started up with an incentive to create jobs. In every region there is a need to stimulate local jobs in marginalised communities, and London and the South-east is no different in needing to have such incentives.

2 Small businesses do not take their business decisions on how much tax they will save. Sales and Marketing, and production costs are primary, and the business environment needs to be as stable as possible. A £5k grant one year to be reversed the next is no the most helpful of devices to encourage growth. A lower tax burden overall is far better.

3 Employer NI needs to be abolished through a more integrated tax system. It is in effect a salary tax which all governments havn’t had the courage to face up to. It is in effect a further 13 rising to 14% on employees taxable income. I am not aware how this bill will encourage more people into self-employment but our national trend of increasing in this area needs consideration.

4 The words National Insurance contributions is a misnomer today and the whole country sees it as a stealth tax which business is being forced to pay.

December 2010