National insurance - people have short memories

[MumofCandR]

I don't understand the outrage over the national insurance increase in the budget. Only 2 years ago (April 2022) Rishi Sunak increased employee NI to 13.25%, 5.25% higher than it is today - fact. Only in January this year it was 12%, today it sits at 8% - fact. This was a very clever move by the conservatives to pull the wool over everyone's eyes. On the one hand, best case scenario it would increase their vote share as they floundered in popularity (didn't work), worst case they would leave the next government with an impossible hole to fill and the NHS underfunded laying the foundations for privatisation, and setting the conditions for any subsequent government to fail - very, very devious. And people seem to have fallen for this machivelian move, memories are incredibly short. So much consternation over a 1.2% increase for employers? This doesn't even bring NI near to where it started out less than 12 months ago, if businesses are this sensitive to a minor % increase in NI then there's far more to worry about the sustainability and viability of these in the first place, surely - AIBU?

I think you should practice what you preach then and wait to see what Labour's legacy is before deciding in advance what it will be.

@Zebedee999 though I agree. It does seem like people but definitely the media hold labour to a higher count. Just annoying.

Sunak applied a levy for 6mth in April 2022 increasing NI for employees from 12 % to 13.5%. It then reverted back to 12% and similarly for employers from 13.8% to 15.05%, before reverting back to 13.8%

This is a bit simplistic though - yes you need to pay it back, but what matters more is whether national debt is rising or falling as a proportion of the economy overall.

One way to get debt falling as a % of GDP is obviously higher taxes, lower spending and running a large enough surplus to pay down the debt. The better way, though, is for the economy to grow at a faster rate than debt.

As I've said, the current budget is planned to be in surplus in two to three years. Borrowing thereafter will be for investment - and what matters there is whether the investment will allow the economy to grow at a faster rate than debt, thereby reducing the debt to GDP ratio.

What do you mean, the threshold for NI was half what it is now only 12 months ago?

Assuming that you're talking about the secondary threshold (which is the relevant one for employer NI contributions), this simply isn't true.

I suspect that you don't actually know much about how the system works, and that's why you don't understand the reaction. You're presenting it as a lot of fuss about an increase for employers of 1.2% but the actual % increase is much higher than that, especially for staff on lower salaries and/or part time contracts.

Combined with the increase in NMW, the cost of employing someone full time on the minimum wage will increase by around 10%. that's a massive increase for employers who have already had to deal sign increased costs across the board. The increase will be slightly offset by the changes to employment support but that only really helps for employers with a very small number of staff.

I absolutely and wholeheartedly support the government's need to raise more income from taxation and the import of investing properly in public services, but I wish they had been brave enough to increase employee NI or income tax etc, rather than shifting the whole burden onto employers. The reality of this policy is that I will probably have to make a couple of valued staff members redundant as a result of this policy. I would have preferred to pay more tax from my own pay packet.

OP you seem to be missing the point. Yes, in some ways it doesn't matter where the tax comes from - Employer's NI goes up (along with all the other additional costs for business) then in a large number of cases, prices go up and the extra cost is passed onto everyone else anyway. But it does make a difference for a couple of reasons.

A) Some businesses such as nurseries and GP surgeries receive government subsidies/grant funding which make up the bulk of their income. They have no option to just put their prices to cover the shortfall. So they close or have to make people redundant.

B) A cut in employee NI benefits working people (great) whereas a rise in Employer's NI leads to price increases for everyone. You may not think that matters but people who are unable to work will be disproportionately affected if you cut employee NI and raise employer's NI.

So it's not as simple as saying 'ok but employee NI went down so if employer's NI goes up it just balances out' because it doesn't in all cases.

Less money in to their well paid executives.

I wish so called charities weren’t allowed to advertise on TV, I don’t believe in any of these foreign based charities, and lots of our poor older people are heavily target to pay out to them

One thing that is missed here is that in our economy, the taxpayer already gives a massive subsidy to employers in the form of benefits for working people.

For those on lower levels of pay, the state needs to step in to top up incomes where employers cannot or do not.

For those employers who do not want to pay more in ERNI, I wonder if they would prefer instead that the NMW was set at a level that would mean that no person in work needed to depend on benefits to be able to live. The UK is quite a low wage economy, and the taxpayer picks up the slack. Employers should remember that.

I think everyone had checked out of the last government. I had higher hopes for this one but realise they are no better, if not worse in many ways.

Just listen to what all the employers are saying: lower wage increases, less investment, fewer jobs. Labour have set the trajectory for higher unemployment as their track record shows they always do. They need people to be kept poor to keep their core voting group.
But as you say time will tell and maybe these changes will not cause higher unemployment.

No, but I’ve been around that long and when it was introduced 8% was deemed reasonable and we have boiling frogged ourselves up to 20%. The problem with having a tax that takes a fifth of turnover is it’s near impossible to outrun it. Every time another expense increases (supplies, energy, utilities, equipment, tax, wages) the things you would think would help cover it by growing your business, such as increasing opening hours, investing in equipment or staffing, increasing prices, expanding into a new area etc becomes really hard because you have to find 125% of what you need instead of 108.7%. Additionally the cliff edges built into the system between the £90k zero rate, the industry specific flat rates and the 20% full rates are anti growth. My industry has a 12.5% flat rate under £230k but even accounting for the (tiny) deductions I can make exiting the flat rate scheme I have to increase turnover by over £70k to have the same margin once I am a penny over- that’s increasing my business by 30% just to stand still and the more I increase it the bigger my VAT bill is. Or I could shut down for a couple of months and stay on 12.5%. Meanwhile Mr “cash is king” grifter next door or the person who has a “broken card machine but you can BACS it” or the person who shuts down and reopens his business every 6 months under a new name are telling HMRC that they are only taking £1700 a week and don’t pay VAT at all (or NI or income tax at the correct level). Would you pay a higher price for food from me because I pay VAT? No, nobody would. I can’t charge more and now I need to cover this extra tax rise too (whereas the grifters don’t because you can’t tell HMRC that you are turning over £1700 a week but have 6 full time staff so they will be registered as part time or be 100% cash in hand). Just because it’s been a bloody long time since we had a VAT rate that didn’t stifle growth then it doesn’t mean it is helpful to give a pound in every fiver away.

I work for a large employer. They are already setting out frozen recruitment, lower wages for new posts, redundancies, no pay rise and no bonuses. I agree with many pp’s that the risk of increased unemployment is a real one. It’s likely to push up inflation and interest rates due to increased prices. Only time will tell I suppose. I’m just hoping I don’t lose my job next year as we are a low margin fixed price business and have no easy way to increase revenue to pay more staff costs.

Table 1.5 of the budget document. Public sector net debt (excluding Bank of England) as a % of GDP is forecast to increase in every year.

okay.

www.dailymail.co.uk/news/article-13532089/amp/young-Sir-Keir-Starmer-ended-Communist-spy-files-Cold-War.html

It’s also in The Times but it’s behind a paywall. Sometimes you have to share from publications accessible to all.

www.thetimes.com/uk/politics/article/rachel-reeves-hangs-portrait-of-communist-hero-in-no-11-hnbp9rtv5

Why is it irritating to state a fact? It’s an interesting choice to put a painting up of a known Marxist whilst increasing inheritance tax, employment taxes and removing a lot of small business financial incentives. I have no skin in the game but on one side you have obvious commies and on the other you have rich elitists. Sick of tribalism getting in the way of people seeing these things.

From The Times article

“Given the nickname “Red Ellen” for her red hair and communist leanings”

“She helped found the British Communist Party in 1920, but was forced to resign her membership four years later when the Labour Party banned dual membership.”

“One biographer described Wilkinson as “self-professed Marxist throughout her political career”, and she travelled to the Soviet Union for a congress of the Communist International.”

Well maybe the chief executives of these big charities that are on million pound a year might lose some wages to cover

Ok, so she was a communist many years ago but I don't see why it's then a "fact" that Rachel Reeves and the rest of the Labour Party are!
If they are, they aren't doing a very good job of it and would have delivered a very different budget.

I imagine she chose the portrait because she is making a point about women in politics and there weren't that many portraits to choose from.

No it doesn't. PSND falls in 2029/30 in that table.

But more importantly, it shows public sector net borrowing falling significantly, from 4.5% of GDP this year to 2.1% in 2029/30, and the current budget deficit eliminated by 2027/28, so that all of that 2.1% is accounted for by capital investment.

One of the very first things Mrs. Thatcher did in 1979 was make VAT 15% across the board.

Yes memories are incredibly short. 14 years ago this country was left without a pot to piss in yet here we are again

It seems you can’t criticise Labour on here without being called a Tory voter.

Its interesting the glee of the ‘rich’ being taxed and min wage going up.

Rich people have more ability to leave and will. They also have easier access to tax loopholes (not illegal avoidance - loopholes like trusts).

Small business owners are often not rich and will end up laying off staff or closing shop altogether.

Farmers aren’t usually cash rich and food security was proven to be an issue in covid times.

Min wage going up means prices going up, it also means skilled workers in real time have had a pay decrease.

If it was crap before, we’re onto even worse now.

Surely as a chancellor you’d understand the optics look abysmal?

You’re telling me there were no other women through history that she could’ve chosen?

Hmm.

That's £1.4 billion less for good causes more for targetted public expenditure (rather than causes favoured by some but not others)..

Probably not that many.

And I am sure she is well aware of the "optics" as you put it but it still doesn't make her a communist.

She can admire the woman for her political career and achievements, surely?

And if you really think this is a communist government you need to look back at what communism really means!

I imagine Jeremy Corbyn and others to the left of the party would be very surprised to hear this definition of Reeve and Starmer!