INCREASES in National Insurance contributions will see company profits in Malvern fall and employment levels drop, Sir Michael Spicer has warned.

The MP for West Worcestershire came to the conclusion after sending a questionnaire to 1,000 business people in the constituency last month.

The expected one per cent NI increase came into force on Sunday, meaning that someone who earns £20,000 will pay an extra £154 a year to the taxman. The 11 per cent rate will have an increased impact for higher earners, with an extra £405 payout for salaries of £40,000 and £605 for those earning £60,000.

Employers will also have to pay the extra percentage point on staff salaries, taking their rate to 12.8 per cent.

Malvern motor car giants Morgan said their contribution would increase by £45,000.

Tim Whitworth, head of finance at Morgan, said: "It's a big hit this year. It doesn't do much for morale because wage packets have gone down."

The impact for businesses in general, Sir Michael claims, will be reduced profits, increased charges and a drop in the number of people being recruited.

He said he would make Chancellor Gordon Brown aware of his views in the House of Commons during the debate on the this week's Budget.