UK Politics

Tax break plan a flop, says Labour

Chancellor George Osborne
Image caption George Osborne has come under fire over the number of private sector jobs created

The Treasury has said more firms could be taking advantage of a tax break for hiring new workers after Labour claimed the initiative had been a "total flop".

The plan, announced by George Osborne in his 2010 Budget, was designed to give up to 400,000 small businesses relief on national insurance payments for each of the first 10 staff hired.

But Labour said just 10,000 companies had benefited from the move so far.

Ministers said Revenue and Customs was striving to "increase this number".

The chancellor's initiative - offering tax breaks worth up to £5,000 for each worker employed - was designed to encourage job creation in the private sector at a time of big cutbacks in public sector employment.

'Shocking admin costs'

But Labour said the three-year plan - which is limited to new firms outside London, the south-east, and east of England - had resulted in only 12,400 new jobs being created between September 2010 and November 2011.

And it said the Treasury's own figures suggested that while the benefit to business so far was £6m, the initiative was costing £12m to set up and administer.

"The one flagship policy that could have made a difference has been a total flop, supporting just one in forty businesses who were promised help," said shadow Treasury minister Owen Smith.

"And shockingly, the government is set to spend twice as much on admin costs than it has so far paid out in support to businesses."

Mr Smith repeated the opposition's call - originally made by shadow chancellor Ed Balls in September - for national insurance relief on new employees to be offered to existing firms across the whole of the UK, not in specific regions.

The Treasury said: "Over 10,000 businesses have already been helped by the scheme, with these employers benefiting by an estimated £6m. But more businesses could benefit and HMRC has been working to increase this number."

A spokesman stressed the tax relief was just one of a number of initiatives designed to help business including cuts to corporation tax, relief on business rates and state-backed loans.

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