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Drop National Insurance increase to save jobs

The government has been urged to scrap plans to increase National Insurance payments in response to rising unemployment figures.

The latest official figures have shown that the number of people out of work climbed by 220,000 in the three months to June.

This brings the unemployment total to 2,435,000 or 7.8 per cent of the working population. The unemployment rate is now the highest it has been since 1995.

Commenting on the figures, the British Chambers of Commerce (BCC) called on the government to dispense with an increase in NICs pencilled in for 2011.

David Kern, chief economist at the BCC, said: “Although the rise in unemployment was not as large as some had feared, there has been a worse than expected decline in the level of employment.

“If there had not been a steep rise in the number of economically inactive people – those not in employment or claiming benefit – the increase in unemployment would have been much worse."

Mr Kern added: “Even if the economy starts growing later this year, it is likely that unemployment will continue rising at a rapid pace. There is still a realistic chance that the jobless total will exceed 3 million next year and it is important for the government to address this.”

He urged the government to reconsider the planned increase in National Insurance contributions, saying it “will slow a recovery in the jobs market and must be scrapped”.

NICs for employers, employees and the self-employed are set to rise by 0.5 per cent in 2011.