Monday, October 05, 2009

Fuck me sideways: it's a reasonable Tory policy!

As we all know, Employer's National Insurance—which currently stands at about 13%—is a direct tax on job creation. Wouldn't it be nice if it was simply abolished?—especially in the current climate.

Well, the Tories haven't promised that, but they have, at least, taken a teeny tiny step in something approaching the right direction.
The Conservatives have announced a tax break plan for firms created in the first two years of a Tory government that they say would create 60,000 jobs.

Shadow chancellor George Osborne said an exemption on employers' National Insurance on their first 10 staff would be funded by savings to be announced.

Speaking at the Conservative Party conference in Manchester, Mr Osborne said the National Insurance measures would be "a huge boost to enterprise".

He added it would send the message: "Invest here, set up your business here, come and make your enterprise here and we will support you. We will send a message loud and clear that this country is open for business."

Aides said the exemption would apply to the first 10 employees hired by a business during its first year, up to an earning limit of £844 a week per employee, or about £44,000 a year.

For a new small business with 10 employees on an average salary of £25,000, Mr Osborne calculates this could save up to £25,000 a year.

Good. It looks like the Tories might be approaching this recession in the right way: don't fucking tax people so much and you will see higher growth and then higher tax receipts.
The bills are racking up," Chief Secretary to the Treasury Liam Byrne said. "George Osborne must tell us how he'll pay for them all."

Shut your fucking face, Byrne: you bunch of bastards have lost any credibility that you might once have had as far as managing the economy is concerned.
Work and Pensions Secretary Yvette Cooper said: "The Tories still want to make cuts in a recession that would destroy jobs and, according to respected economists, would actually push unemployment up to five million.

"They are simply rehashing Labour policies without the investment needed to make them work."

You don't actually know what policy you are commenting on, do you, Mrs Balls? Go fuck yourself or your husband, you useless cow. Both would be equally unpleasant.

Ignore the NuLabour nitwits: we want more of this sort of stuff, please, George.


TheFatBigot said...

The recession is entirely irrelevant here.

Recession or no recession, adding substantial costs to business can only destroy value-adding jobs. And bear in mind always that it is value-adding work that increases national wealth.

Penalising employers by adding 13% National Insurance to wage bills makes it more expensive to employ people and, necessarily, reduces the number employed. Of course there's a threshold, so it's actually around 10% overall, but it is still a substantial cost.

Removing that cost should pay for itself quite easily. Indeed, the endogenous growth theory behind massive expansion of (the usually non-productive parts of) state expenditure supports that conclusion. Whether the 10% is retained by employers or paid to employees (or a combination of the two) there will be (i) more investment capital available and/or (ii) more spending money available.

If more capital is available more ventures can be started or expanded. They might succeed or fail, however we wouldn't be one of the richest countries in the world if the overall balance through history had been one of failure.

If more spending money is available other businesses, employing other people, will have the opportunity to expand.

The most important aspect of this is that the money will be kept in the sector of the economy that actually produces something.

State bureaucracy is a net drain. It cannot be anything else because it adds no value. True though it is that a state-employed paper-shuffler with £15,000 to spend is in the same position as a private-sector employee with £15,000 to spend, the state employee receives that £15,000 without making a net contribution to wealth whereas the private sector employee can only receive it if his work adds value.

There cannot be any worse example of a tax than employer's NI contributions.

Roue le Jour said...

Employers NI is paid by the employee. In the first year such a tax is introduced, the burden falls entirely on the employer. Over subsequent years wages rise more slowly than they otherwise would have and after five to ten years the burden is fully on the employee. It is a brilliantly clever tax because those paying it don't even know they are. Anyone on 20k is really on 22k and the government takes the first 2k before you even see it.

If you don't think this is true, try and go self-employed. Except for a small number of occupations, the revenue will force you to start a limited company so that you really do employ yourself and thus have to pay employers NI.

There is a very simple rule of thumb. The person (or entity) whose income is used to calculate the tax is the person paying the tax.

The suggestion to give an employers NI two year holiday to businesses employing ten or less people is a completely crap idea. The main beneficiaries will be individuals, consultants and the like, trading as limited companies who will simply start a new company and take the two year tax holiday with no benefit to the overall economy.

Letters From A Tory said...

Ha, I had the same reaction when I read Yvette Cooper's comments.

Ed and Yvette's currency is dwindling fast now that Mandelson has returned, and the desperation in that quote is palpable.

Anonymous said...

I don't rate it. Complicated, fiddling at the edges.

1. Anyone remotely serious about tax transparency would consolidate income tax and NI, as Mr. le Jour implies.

2. It's market distorting - a good establish business can be destabilised by the discriminatory subsidy of a start up [ not theoretical - I've seen this with

Anonymous said...

oops - continued

high technology start-ups, that were in reality doing nothing new, but ticked the boxes for government finding ]

Budgie said...

As Roue le Jour said, it is a badly thought through politicians wheeze. Another reason not to vote Tory.

Roue le Jour said...

Correctly inferred, Anonymous, I would favour consolidation, but as Nigel Lawson pointed out many years ago, the whole point of the complexity of three separate income taxes is "to conceal as far as possible from the taxpayer the true level of tax paid", so I'm not holding my breath.

Back in the days when I ran a small company, the one concession I would have liked from the government, assuming tax cuts are not on the table, was for the Revenue to deal with tax returns in the year submitted. Paye slaves probably don't realise this, but the Revenue doesn't look at your return when you send it to them. What they actually do is put it to one side until they have a few and look at them together.

You can easily see the benefits to the Revenue, its cheaper than doing one at a time and any fiddles might be more obvious over a few years. The down side for the tax payer is that you're never really sure if you are square with the Revenue or not. The first you hear of any problems is the dreaded letter starting "Dear Sir, re 05/06..." guaranteed to arrive in the midst of a hand-to-mouth quite period.

Of course such a technical measure isn't worth any headlines, so I'm not holding my breath on that, either.

ukipwebmaster said...

Feels like 1992 all over again:

Anonymous said...

Feels like ukipwebmaster all over again.

Devil's Kitchen said...

A few points chaps,

1) Employer's NICs most definitely should not be counted as part of your salary. Since you are willing to work for the take home pay that you already do, it is far more likely that any employer would use the money saved from employer's NICs for things other than paying you more cash, e.g. investment in equipment, hiring more staff, dropping the price of the widgets that the company sells, etc.

2) Yes, NICs and income tax should be consolidated together, ideally.

But, ideally, NICs and income tax should be scrapped entirely. But we are not talking about an ideal situation: only this specific proposal.

3) I said that it was a reasonable policy, no more. It is a very good policy, however, when compared with NuLabour's approach.

NuLabour's approach is to increase taxes, and then channel the spending through government. They then claim that everything that government spends is a corresponding increase in GDP.

The Tories have decided—in however desultory a manner (and it is desultory and will, as Anon pointed out, have unintended consequences, e.g. uncutting other firms through box-ticking behaviour) that lifting the tax burden on businesses is a better way to generate cash, tax revenue and productive jobs.

It's not a revolution, but it is a step in the right direction.


Simon Hodges said...

I'm very much in favour of the policy. Innovation boosting :)

David Davis (Libertarian Alliance) said...

Here's a Tory policy they could do, and it won't cost a PENNY...

They can, as of today, now, this minute, repudiate and disown all government debt taken out after this moment....(the moment can be easliy logged.)

See what I said here earlier today at

Furthermore, the sudden removal of any more funds wll precipitate the very crisis that Broon was desperately trying to avoid. His entire votariat will be on the street, jobless and officeless, all sacked via twitter or txtmsg, and with no more money and nowhere to go but to his office.

There might be enough in the Bank to pay the Army, just, to get it and its kit back from upper-Jipoopooland. Which owuld be right and just. But not to use the cash to pay people such as "minist-ers" or "Hospit-al Trust manag-ers".

Anonymous said...

Don’t really understand point 1, DK. As you say “you are willing to work for the take home pay that you already do”, so with that logic income tax and employees’ NI “is not part of your salary” either. Employers’ NI is no different, just particularly insidious as it is hidden.

Budgie said...

The only reason for complicating the tax system with little wheezes, like this Tory proposal, is to keep politicians and bureaucrats in work shuffling our money around. If the Tories want to boost the economy cut taxes; even Labour has done that with VAT and the car scrappage scheme.

But the best way is to cut general taxes. And, of course, it will mean cutting expenditure on useless parts of the government (probably 50 per cent of it).

Rob said...

Vince Cable:

"Many small businessmen will be shocked to learn that the Tories believe a start-up business has a wage bill of £250,000."

Twat. It's just an example, see? You do see that, don't you Vince? So you were just being a slippery cunt again.

As he is someone who doesn't know the difference between tax avoidance and evasion, I shall disregard everything he says.

dr cromarty said...

The bills are racking up," Chief Secretary to the Treasury Liam Byrne said. "George Osborne must tell us how he'll pay for them all."

He sounds like Mr Creosote stuffing his fat face with food and shouting "Who's paying for this meal,George?".

The bills are racking up becuase of YOU, Byrne, you incompetent, profligate fuck.

Roue le Jour said...

DK, when I said it's really the employee who pays 'employers' NI, I wasn't saying that if employers NI was abolished employers would hand the money saved to employees as you suggest. I wouldn't expect them to for one minute. I said introducing a payroll tax will depress wages in the following years. Following on from that, if employers NI had never been imposed, wages would now be higher, so it is most definitely coming out of employees pockets.

Consider it as a black box. If you didn't know how the formula, but you knew how much the employer paid and how much the Revenue and the employee received, on what basis would you say part of the tax is paid by one party, and part by the other? If employers NI was abolished and employees NI and salary adjusted to exactly compensate, how could you argue the burden had shifted from employer to employee when nothing had actually changed?

As to the proposal itself, even if I benefited from it I wouldn't be impressed by it because they seem to think that only new business will claim the reduction. I would expect the main beneficiaries to be existing businesses that meet the requirements and can bear the inconvenience of closing one company and starting (or buying off the shelf) a new one.

This plays well with the punters because the ordinary public's perception of a company is something you start, build up and hand over to your heirs, but there are businesses that open and close companies all the time. Property developers often start a new company per project and anyone else that wants to shed liability.

But yes, of course, all tax reduction should be applauded. Clap. Clap.

Anonymous said...

"This plays well with the punters "

Precisely. The policy was designed with a precision optimised newspaper-headline/cost-to-the-exchequer ratio. And bugger what it actually does. BluLabour.

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