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Osborne Urged to Raise Tax Threshold for Firms in U.K. Budget

U.K. Chancellor of the Exchequer George Osborne should use his March 19 budget to raise the level at which businesses pay social-security tax to help boost hiring, a research institute said.

Increasing the threshold for so-called National Insurance Contributions in 2015 to 192 pounds ($319) per week from 157 pounds, the equivalent of 10,000 pounds a year, would save firms 250 pounds for every person they employ, the London-based Policy Exchange said today. The move would cost the government 5.4 billion pounds, it said.

“Wages will eventually rise as employment levels continue to increase, with economic growth the key to this recovery,” Matthew Tinsley, who conducted the analysis, said in an e-mail. “However, the government could boost the pay packets of thousands of hard-working people across the country by making it easier for businesses of all shapes and sizes to take on more staff, speeding up the recovery in the labor market.”

Political parties are debating the best way to boost employment and wages as they prepare for a general election in 14 months. The Liberal Democrats say an increase in the amount people can earn before paying income tax to 12,500 pounds from 10,000 pounds will be a key demand in any coalition talks.

According to the Institute for Fiscal Studies, raising the personal income-tax allowance is a badly targeted way to help the low-paid because most of the benefit goes to families in the top half of the income distribution.

National Insurance Contributions are a payroll tax borne by both workers and employers to fund state benefits.

The government has “made every effort to make sure work pays and I’m sure we will continue to do so,” Conservative Treasury minister David Gauke told lawmakers yesterday, when asked whether changes to NICs were planned.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Andrew Atkinson, Fergal O’Brien

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