Chancellor Gordon Brown will tonight be warned a £5 billion a year rise in employment costs threatens to price people out of jobs.

CBI director general Digby Jones will say rises in the cost of employing people risked getting out of control and endangered plans for full employment.

He will deliver his warning in a speech in London tonight.

The CBI said the latest increase will be felt on Sunday when firms face an annual £4 billion hike in national insurance and £300 million for parental employment rights.

The figure is forecast to reach £5 billion in December after the minimum wage rises 30p to £4.50 and the Government introduces EU laws on discrimination.

Meanwhile, a separate survey today says one in five firms is planning to lay off workers to help pay for the imminent increase in insurance contributions.

A third of small and medium-sized companies said they expected job cuts as a direct result of the rise.

Almost nine out of ten of the 1,000 firms polled by the British Chambers of Commerce said the increased contributions would have an adverse effect on their business.

President of the chambers Isabella Moore said: "The Chancellor could not have picked a worse time to introduce this increase.

"He announced this last year to be implemented now but the fact one in five employers are considering cutting staff to deal with this increase is of great concern.

"Those companies not looking to cut jobs are intending to cut wages, investment or research. Their only other option is to increase debt."

Monday March 31 2003