An incoming Government must concentrate its efforts on reducing the budget deficit, and should scrap the planned increase in national insurance contributions (NICs), according to the British Chambers of Commerce (BCC).

The latest monthly survey from the business group revealed that 41% of companies believe reducing the deficit should be the Government's number one priority, while many also believe that an increase in NICs represents the most damaging tax rise that could be imposed on them.

36% of those surveyed felt that a VAT increase would be the least damaging to their business, compared with just 6.6% who selected NICs as the more favourable option.

Meanwhile, the business group has used the Treasury's Tax Ready Reckoner to calculate that increasing VAT by 1% to 18.5% would raise an extra £4.5bn in revenue, compared with the £5.1bn that would be netted by a rise in NICs. The BCC argues that the difference between the two sums could be offset by targeted spending cuts.

David Frost, BCC Director General, said, 'Companies have and will continue to play their part in creating wealth and jobs, generating economic growth and driving recovery, but the right environment needs to be in place'.

'Raising a damaging tax on business, like NICs, will be counter-productive. It will mean fewer jobs and less tax revenue in the long-term. While businesses fully understand the need to bring down the UK's deficit, they are clearly saying that using VAT would be a less damaging way to achieve this.'