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How Osborne missed a trick

After spending Monday night battling rivals on prime-time TV, Tuesday morning saw the Chancellor face an inquisition from the Treasury Select Committee.

Having gone on the attack in the debate over the Tories' plans to reverse his plans for National Insurance increases, Mr Darling had to defend the rises during a battle with Michael Fallon, the deputy chairman of the committee.

Mr Fallon made a far better defence for scrapping the rises than George Osborne did on Monday. While Mr Osborne talked of offering a tax cut to those on modest earnings — leaving himself open to questions about his priorities, given the Tories' determination to be seen as tough on the deficit — Mr Fallon chose to focus on the impact on employment. With employers facing a rise in NI contributions too, he pointed out, the increases could damage unemployment figures.

Though it seems unlikely that the costs from such joblessness would outweigh the additional revenue the Treasury will get from higher NI, Mr Darling and his civil servants were hardly convincing in their response —they pointed Mr Fallon towards a section of the documentation covering unemployment forecasts, made no mention of the NI issue.

All the political parties accept it is the private sector that will have to deliver economic recovery, if it is to be sustainable. But the NI rise that employers are being asked to pay from April 2011 will cost in excess of £2bn a year, far more than the value of the goodies handed out to business in the Budget. Tough choices, maybe, but a line of attack Mr Osborne overlooked.

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