News, Politics

Tories pledge to reduce Labour tax rise

Tories pledge to reduce Labour tax rise
March 29th, 2010
Author: Jeff Taylor

In an attempt to put 'clear blue water' between the parties, George Osborne, the Shadow Chancellor, is expected to announce today that his party will reduce Labour's National Insurance Contribution (NIC) rise scheduled for 2011.

The move, he argues, will take seven out of ten workers out of the reach of the tax rise, but higher earners will still be hit.

The cost of this is to be met by public spending cuts, not by raising taxes in other areas such as VAT.

Labour and the Liberal Democrats will of course point out that if this requires cuts in spending it will require cuts in services. They will also make the most of the Tories lack of clarity on where exactly any spending cut axe would fall.

There is also the matter of not only putting distance between themselves and Labour, they also risk putting a wedge between themselves and the LibDems. This may give them problems in the event of a hung parliament, something many pundits believe may well happen.

But this will be a more business friendly policy. The CBI had previously condemned the NI rise as a tax on jobs. The British Chamber of Commerce and Chartered Institute of Personnel and Development also said that the rise would endanger the economic recovery.

NICs are due to rise from 11% to 12% for employees and from 12.8% to 13.8% next year. This year NICs will raise some £97 billion for the public purse. The rise would see a further gain of £10 billion, which the Conservatives hope to limit to £5 billion with this proposal.

The Tories have been trying to find a way of cutting this tax rise but have not been able to identify a way of funding it until now. Just recently Ken Clarke said that it would not be possible to do so before the election.

The NIC increase is central to Labour's plans to reduce the deficit. They argue that it has to be done and that without it cuts that affect the economy would have to be made.

That the difference between the parties comes down to whether or not seven out of ten workers and businesses pay an extra 1% in NICs from next year should worry us all.

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3 Responses to “Tories pledge to reduce Labour tax rise”

  1. Phil Grimm says:

    Are we right to be worried Jeff?

    It all seems to go to the heart of our democracy. Politicians are more interested in gaining and holding power that doing the right thing when they've got it. All the people get a vote of equal weighting regardless of their contribution to society. Policies are tailored to bribe the electorate and the electorate says "thank you very much, what's next?"

    Employers' National Insurance is a tax on jobs. Employees' National Insuance is just another Income Tax but hypothicated towards pensions and other entitlements.

    I believe that Middle Britain should get the services they are willing to pay for rather than hiding behind Politicians who promise the earth, soak the rich and borrow the rest.

    I quite like Vince Cable but the LibDems concept of what constitutes "fair" taxation is at best, subjective and in my view plain wrong.

    We may agree that one day it will all go bang and therefore we should put our house in order now but how do you sell that to a broader electorate, brought up on credit and benefits who have no desire to have the music turned off?

    Party on, Jeff.

  2. Jeff Taylor says:

    I agree, what I meant is that all we're gonna get is more of the same whoever gets in. What are they going to promise when the money runs out though?

  3. Phil Grimm says:

    That seems to be a problem for next time around. Brown has sold the line that cuts cannot be fully implemented until the recovery is locked in and then they'll be managed over a period of years. Cameron has bottled out of competing on the scale of cuts required, only that they should be sooner. Would that risk the recovery? What recovery? I expect the economy to shrink again regardless of who wins power. The only questions are when and how bad will it be.