‘Ditch NICs increase to free up funds for apprentices’

March 2022

The Treasury is being urged to consider a late U-turn on introducing the National Insurance contributions (NICs) increase next month to boost apprenticeships.

All NICs rates will increase by 1.25% from April 2022 to help fund the development of the new health-and-social-care levy, which kicks in from April 2023.

The Federation of Small Businesses (FSB) wants ministers to ditch increasing the so-called ‘jobs tax’ to help recover lost apprenticeship numbers.

The FSB claimed apprenticeship starts fell from just under 500,000 a year in 2016/17, before the introduction of the apprenticeship levy, to under 325,000 in 2020/21.

To address this downward trend, the FSB wants the Treasury to remove all employer NICs costs for apprentices, plus cancelling the planned increases to NICs and dividend taxation to free up funds for recruitment and training.

It also would like the apprentice payment, which was worth £3,000 to employers that hired apprentices, to be reinstated after the scheme closed on 31 January 2022.

Mike Cherry, chairman at the FSB, said:

“By looking again at its approach to NICs, the Government can make a real difference here – directly, by bringing down the immediate costs of taking an apprentice on, and indirectly, by freeing up more funds for recruitment and training at a moment when cash reserves are depleted.

“Small businesses disproportionately hire young people and those from disadvantaged groups when they create apprenticeships, so a targeted reintroduction of the hiring incentive that existed over lockdowns makes sense in the context of the levelling-up agenda.”

However, the Government has no intention to renege on its promise after a spokesperson said Chancellor Rishi Sunak is “fully committed” to increase NICs and dividends tax.

Despite being written into law, this could yet change amid growing concerns over rising energy prices and the cost-of-living crisis engulfing many households.

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