Tring to get my head round the NI increase proposal

Same principles apply to any budget be it household or Government. So, if you have a big debt that you need to clear you could -

a) Increase Income substantially
b) Cut expenditure drastically
c) Increase income a bit and cut expenditure a bit

Over simplified I know but - Labour favour a); Tories favour b); Liberals, Plaid, SNP favour c), with biggest cuts being made by getting out of wars and not replacing Trident)

The arguments for NI rises includes the fact that people on benefits, and all those over pension age (even if still working or with big investment income) do not pay NI.

The arguments against NI rises includes the fact that employers have to pay NI contributions too for each employee, and a rise may force employers to cut their workforce. The employers NI contributions are not based on their profits but on the number of employees, so a company which is labour intensive and struggling, might well go under completely.

I saw a clip of Nick Clegg on the news and he wriggled around and looked pretty darned uncomfortable (schoolboyish even) without committing himself either way.

It will cost employers more to employ people because they have to pay the Govt 12.8% (potentially 13.8%) of virtually all the salaries they pay (earnings over £95 a week I think).

The increase in NI by Labour will come in from April 2011 onwards. While the rates for both employees and employers increase, the threshold for employee NI has been increased so that anyone earning under £20,000 will actually pay less NI.

Businesses will incur an extra 1% employer's NI (the employer will pay 13.8% of an employee's gross pay), although this will be tax deductible for the business. PAYE and NI have to be paid over to the government monthly in most cases, so any increase here impacts on a business' cash flow as well as hitting the overall profit.

Meanwhile if the Tories make cuts to public spending of £6bn, there is the risk that this will also be a 'tax on jobs' because it will cause a contraction in ongoing public sector work resulting in increased unemployment and potentially threatening the economic recovery.

I have no idea what to vote by the way!!

NI increase will hit those who earn over £20k so not the really low earners but it's a tax on jobs basically as it will also cost the employer more to employ people although tbh I don't understand why, I just know it will as it was talked about on question time which is why business are opposed to it.

If I understand NI correctly it also hits lower earners disproportionately hard.

Increasing NI seems like a very easy and lazy target to me. It won't be the first time they've done it either.

My take on it is:

Labour will increase NI in order to pay a % of the national debt.

Tories say they can save money through government efficiency savings so will not need to make the NI increase. The money rasied through savings will pay off a % off national debt.

Libs say Tories cannot make those efficeny savings (they point to David Cameron a little while ago saying labour efficiency savings were a fabrication) and they need to say what they will cut in order to pay the % off national debt off.

Roughly that's how I read it.