The British Chamber of Commerce (BCC) has revealed today (15 February) that small firms in the UK believe that the planned National Insurance increase should be scrapped and replaced by a less damaging alternative.

In the BCC’s latest Monthly Business Survey, companies were asked what they thought were the Government’s most pressing issues. A considerable 41% answered that reducing the budget deficit should be the number one priority, while 22% believed that cutting legislative burden was most important.

When asked about the measures that the Government could take to reduce public debt, 36% said that they felt VAT would be the least damaging option for their business, compared to the 6% that voted in favour of National Insurance rises.

With National Insurance increases scheduled for April 2011, and with the next general election fast approaching, the BCC’s latest findings come at an interesting time for British politicians. David Frost, Director General of the BCC, commented:

“The message from business is clear. After an election, we have to get a serious grip on the country’s public finances and escalating debt. Cutting the deficit means making tough decisions on spending, like freezing the public sector wage bill and reforming public sector pensions.

“Raising a damaging tax on business, like NICs, will be counter-productive. It will mean fewer jobs and less tax revenue in the long-term. While businesses fully understand the need to bring down the UK’s deficit, they are clearly saying that using VAT would be a less damaging way to achieve this.”

Government forecasts indicate that raising VAT by 1% would create an extra £4.5 billion, while a 1% National Insurance increase would provide £5.1 billion.