Employers should not be ‘forced’ to compensate for 10p tax rate

The government has been urged not to use an increase in the minimum wage to force employers into compensating workers for the abolition of the 10p income tax rate.

The warning came from the Forum of Private Business (FPB).

The Chancellor, Alistair Darling and Business Secretary, John Hutton have asked the Low Pay Commission (LPC) to assess changes to the minimum wage as a possible way of compensating those low paid workers affected by the scrapping of the 10p rate, the FPB said.

However, the FPB argued that employers should not be expected to make up shortfalls in the government’s policies on personal taxation.

An increase in the national minimum wage could see smaller businesses raising prices, a move that, in turn, could lead to job losses.

Phil Orford, the FPB’s chief executive, said: “Any notion that the UK’s businesses should be required to pick up the tab for the government’s hashed personal taxation policies is totally ludicrous.”

Mr Orford added: “This is not even a stealth tax; it is a blatant attempt to retain revenues generated by the removal of the 10p personal taxation rate by forcing businesses to bear the financial burden through increases in the minimum wage. We cannot quite believe that it is being put forward as a serious solution."

Date:29 April 2008