Chancellor Gordon Brown’s decision to increase employers’ National Insurance contributions by 1% has marred a budget designed to boost business competitiveness.

Business leaders were unhappy about Brown’s decision to fund NHS reform from National Insurance.

However, they welcomed a raft of tax breaks for small businesses, including a reduction in corporation tax.

Tim Nicholson, chief executive of the Recruitment and Employment Confederation said: ‘The increase in National Insurance contributions will add costs for business which may stifle economic growth and job creation just as these are starting to pick up.

‘More money for public services will not necessarily assist them to retain more staff. It’s about better working practices, incentives, housing and flexibility.

‘The private recruitment industry has a major contribution in achieving and maintaining staff levels in these essential public services.’