Rishi Sunak is debating whether to increase the employment allowance in order to encourage Britain’s 5.9m small business to take on more staff.


Currently, small businesses can save £4,000 off their national insurance bill through the employment allowance. More than 600,000 small businesses pay nothing in national insurance contributions through the scheme.

But the Treasury is mulling whether to increase the employment allowance much further in order to head off what has been dubbed “Jobpocalypse Now” as workers come off furlough. The Coronavirus Job Retention Scheme will expire completely by end-October. The Bank of England expects unemployment to jump from 4 per cent to 9 per cent between April and June 2020, the highest rate since 1994 – and that is even before the furlough scheme even starts to wind down from August.

Separately, the Treasury is also debating whether scrap national insurance this year for small businesses, a proposal which the Taxpayers’ Alliance estimates could save or create between 595,000 and 892,000 jobs

Tej Parikh, chief economist at the ­Institute of Directors (IoD), told the Telegraph that “Increasing the employment allowance would be a sensible step to take in the Budget statement,” he said.

Craig Beaumont, director of external affairs at the Federation of Small Businesses, told the newspaper: “We would want any event to reduce the fixed cost of employment, that would be either through a national insurance holiday or to upgrade the employment allowance.”

Economic stimulus package

Meanwhile, Mr Sunak and Prime Minister Boris Johnson are working on plans for an economic stimulus package, due to be unveiled in a speech from the PM later this month and in a formal statement by the chancellor on July 9.

Proposals include a “bad bank” to take on the debts of companies that default on bounce-back loans, along with some kind of action on national insurance, whether it’s suspending NI for small firms or increasing employment allowance.