Business groups have cautiously welcomed a new Conservative policy that would see a plan for a National Insurance (NI) tax holiday for new business created in the first two years of a Tory government.

The tax break on employers' NI contributions would apply to the first ten people recruited by a new firm in the first two years of a new Conservative government.

"For prospective employers, as one of a raft of measures aimed at getting Britain back to work and boosting the country's skills base, abolishing National Insurance (NI) for new start ups stands out as today's key announcement," said Phil Orford, the chief executive of the Forum of Private Businesses.

"At present, employers' NI contributions are set to rise by 0.5% from 2011, just as small businesses are likely to be in a position to recruit staff in earnest. We will examine the savings that will need to be made to pay for this initiative, but welcome it in principle as a genuine stimulus to employment, small business growth and sustained economic recovery."