The People Bulletin

Now that polling day has been set for 6 May, the electioneering that has already got underway will ramp up in earnest once Parliament is dissolved on 12^th of April. One of the battlefields is the hike in national insurance (set out on pages 123 and 124 of Alistair Darling’s Budget 2010[1]) which has been dominating the headlines. Pressure has mounted upon Gordon Brown to scrap what is widely perceived as a threat to the UK’s economic recovery and a ‘tax on jobs’. His chancellor was unable to deny that the increase would cost jobs when grilled by MPs on 31 March. 

As announced in the 2009 Pre-Budget Report[2], from 6 April 2010, the employee, employer and self-employed rates of national insurance contributions (NICs) will increase by 0.5%.  This is in addition to the 0.5% already announced at the 2008 Pre-Budget Report that also comes into effect on 6 April 2010. In other words, employees will see a rise from 11p to 12p in the £ hitting their pay packet and employers contributions will increase from 12.8% to 13.8%. 

Shadow chancellor George Osborne has committed to scrap this increase if the Tories get elected and claims that ‘everyone liable for Employee’s NICs earning between £7,100 and £45,400 – which is 7 out of 10 working people – will be up to £150 better off a year under the Conservatives. Lower earners will get the greatest benefit as a percentage of their earnings. Nobody will be worse off.’ [3] The funding for scrapping the scheme would apparently come from cutting ‘government waste.’ 

CBI boss Richard Lambert hade already called for the proposed increase to be reversed and welcomed the Conservative proposals: ‘The Conservatives’ plan to reduce next year’s increase in employers’ NICs is welcome, and will help large and small businesses alike. NICs are a tax on jobs and increasing them is a bad idea when we want to promote job creation. We continue to call for the proposed increase to be cancelled entirely, as and when action on the public finances makes this possible.’ 

Lord Sugar, the government’s enterprise tsar made the point to the Daily Telegraph that ‘No one wants to see an increase in NI, including the Chancellor himself. I assume the increase is needed to balance the books somewhere or other.  It’s very easy to promise cancellation, however those advocating it need to explain where they will find the money to do so.’[4]

The 2010 Budget stated that net borrowing for 2010/11 would be £163bn, dropping to £74bn by 2014/15.[5]  

 [1] www.hm-treasury.gov.uk/d/budget2010_complete.pdf 

[2] See ‘Cold Comfort from the Pre-Budget Report’ in The People Bulletin, 17 December 2009

[3] See ‘Labour's tax rise on working people – briefing’ which is downloadable from  www.conservatives.com/News/News_stories/2010/03/We_will_stop_Labours_damaging_NIC_increase.aspx 

[4] www.telegraph.co.uk/news/election-2010/7546363/Business-leaders-join-push-to-scrap-jobs-tax.html

[5] See ‘Section 2: Maintaining macroeconomic stability’ in the Budget 2010 report, beginning on page 13.