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Business Groups Condemn Government’s Minimum Wage Solution to Tax Issue

Small Business News

- 14th May 2008

Business groups have spoken out against a controversial Government proposal to raise the minimum wage as a way for people to recoup losses following the removal of the 10p rate of income tax.

Chancellor Alistair Darling and Enterprise Secretary John Hutton asked the Low Pay Commission to consider the changes as part of a plan to compensate low-paid workers, following the decision to scrap the 10p rate of tax.

Experts have calculated that the hourly minimum wage would have to rise to £9.49, up from its current rate of £5.52, if workers were not to lose out.

Hitting out at the proposals, the Forum of Private Business claimed the changes would force small businesses to put up prices and could potentially lead to higher levels of unemployment.

It added that employers should not be expected to make up shortfalls in the Government’s policies on personal taxation.

“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,” said FPB chief executive Phil Orford.

A spokesman for the Federation of Small Businesses (FSB) agreed that employers should not be made to “pick up the tab”, warning that small businesses would be affected quite seriously if the proposals were to go ahead. However, the FSB felt that it was ‘unlikely’ that the government would press ahead with the move.

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