Friday, 14 May 2010

A taxing issue

I received an email yesterday about the concern business leaders expressed over Labour’s plans to increase National Insurance charges. It included a link to which summarises criticisms from “around 70 of Britain’s top business leaders”, including comments such as “this will greatly affect our business when it comes to hiring apprentices”. These criticisms may be seen as no longer relevant, given that Labour are no longer in power and the Tories intention going into the election was to scrap the planned increase. However the Tories have accepted the Liberal Democrat proposal for a “substantial increase” in personal tax allowances to benefit low and middle-income workers from April 2011. This needs to be paid for and the plan currently is to keep part of the planned National Insurance rise – the employee element – in place. The net effect of this will be transfer some of the tax burden on employees from those on the lowest incomes to those on the highest. Surely a good thing, and a remarkable concession for the Liberal Democrats to obtain from what is primarily a Conservative government.

I can imagine there will still be concerns because of National Insurance being seen as a “jobs tax”, but since only the employee element increase is being retained, the direct cost to employers of taking on new employees will not increase. Furthermore, since those employees on the lowest incomes will experience a net gain, there will be more incentive for unemployed to accept employment and less likelihood that doing so will make them financially worse off.

Finally, I think we need to see National Insurance as what it was originally intended to be, and what its name implies. It is a way of putting money aside for our future. If more money is needed in order to guarantee our future pensions, then we need to accept that and not dig a hole for future governments to deal with.

Change the World.

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