News that the national insurance holiday scheme for start-ups has cost more to run than it has saved businesses has raised an uproar.

News that the national insurance holiday scheme for start-ups has cost more to run than it has saved businesses has raised an uproar.

It seems 10,000 businesses have benefitted from the scheme, which allows start-ups outside the South East of England exemption from employers’ national insurance contributions on the first ten staff hired. That is far below the government’s target of helping 400,000 companies over the three-year initiative.

Labour claims the scheme has cost £12 million to set up, but aided businesses to the tune of only £6 million.

The truth is that this government and the last have launched a panoply of initiatives that were billed as lifelines to businesses struggling through recession. Some offerings have seemed tokenistic, more about giving the impression of action than offering real help. The last government’s penny-pinching £10 million fund for women entrepreneurs, and David Cameron’s vaunted ‘Start-up Britain’ scheme, spring immediately to mind. I imagine most businesses would happily exchange a hundred government initiatives of this ilk for half a penny off corporation tax.

However, this one did seem to have some substance, as it offered a tangible tax break to aid job creation and unlike many other initiatives supposed to help growing businesses, was carefully targeted at those which needed it most. In fact, the main criticism of it, before yesterday’s figures were released, was that it was not available in London and the South East.

It might take a bit more time for set-up costs to be outweighed by economic benefits, and it could be unfair to dismiss the initiative before it is even midway through its duration. I’m prepared to give it the benefit of the doubt for at least another 12 months.

But it is a shame the government has dropped the much bolder idea of merging income tax with national insurance. If they had really wanted to simplify tax, this would have been a masterstroke.

As part of this, employers’ national insurance — essentially a tax on employing people — could have been scrapped altogether. Think what that would have done for job creation.