Thursday 16 March 2017

"U-turn" on national insurance contriutions

I do not see why it should necessarily be a cause for derision that a government reverses a decision, as our government has done in deciding not, after all, to increase the rate of some (my emphasis) National Insurance Contributions (NICs) by a modest 1% next year and another 1% the year after that.  Listening to people, and responding where appropriate, are essential aspects of democracy (aka "government by discussion") and should be applauded.

However, a great deal depends on which people are listened to.  For example, this government is turning a very deaf ear indeed to the 48% of those who cast their votes for remaining in the European Union.

I do not claim to understand  all the intricacies of National Insurance Contributions, or even why  there should be four (or possibly even more?) classes.  What I do know is that the increase was restricted to Class 4 contributions, that these applied to the self-employed, and that those self employed who earned less than £16 250 a year (I suspect most of the involuntary self-employed and those just starting out) would have had a reduction in their payments.  The increase would have applied only to those earning more than £16 250, admittedly substantially below the median wage, but  many would be earning very much more than the median wage.

The reasons for the change were, we were told, twofold.

1.  Historically  the self-employed received far fewer benefits (for example, in terms of pensions) from the  system  than those in normal employment (ie working for someone else), so it seemed right that their contributions should be less.  However in recent years the benefits for the self-employed  have moved upwards towards those in normal employment so it is fair that their contributions should increase too.  Our Chancellor of the Exchequer, Mr Hammond, was correcting an anomaly.

2. For employers, (eg UBER) declaring their workforce to be self-employed can be seen as a tax dodge, in that it relieves the employer of paying the employers' contribution of the NICs (as well as responsibility for sick pay, holidays etc).  For the employee too it can be a tax dodge in that he or she pays a smaller contributions, as in the scheme  dubbed "the lump" in the building trade years ago. Thus the move was part of the government's campaign to reduce tax avoidance.

These seem perfectly reasonable to me.

But a few well-heeled self-employed and 18 or so Tory backbenchers (and for some incomprehensible reason, the Labour Party) with the vociferous support of the right wing press  have caused a furore and described the move as a tax on enterprise. And the government has caved in in favour of their mates.

Would they had listened to those speaking up on behalf of the disabled, whose Personal Independence Payments are reduced as from today.

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