Posted by: secretperson | April 7, 2010

National Insurance – an Election Decider?

The title is of course slightly sarcastic. I can’t imagine many people rushing to the polls with their heads filled with thoughts of National Insurance percentages. It is quite simply pathetic that the biggest dividing line so far is such a relatively minor issue. And El Gordo is not just being melodramatic but blatantly wrong.

The deficit this financial year was £167 billion. That is, the government spent £167 billion pounds more than it took in in taxes. The value of the proposed NI increase is £6 billion. The government spent over £600 billion. They are arguing, their big dividing line, the thing that splits right from left, and right from wrong, supposedly, is less than 1% of government spending.

The Tories are right, obviously, that increasing the cost of employment can only reduce employment. A valid response might be that we need the money and it has to come from somewhere. But that is not the response Brown has given.

First, and most blatantly wrong, he has claimed this is taking $6bn out of the economy. A tax cut is surely the opposite! When Labour cut the VAT rate it counted as a fiscal stimulus. From a 2008 Times article: ‘A 2.5% Vat cut would cost £12.5 billion a year, making it by far the biggest element of Brown’s £15 billion-plus “fiscal stimulus”.’

So a Labour tax cut is a stimulus and a Tory tax cut is taking money out of the economy. Sounds like someone’s being economical with the economics.

The question remains whether the tax cut is paid for by raising other taxes, in which case its fair enough to argue over the distribution. Or by borrowing more, which I thought Labour supported (for a year at least). Or by spending cuts. The Tories claim efficiency cuts, Labour cry ‘won’t somebody think of the schools and hospitals and police’ (these comprise about a quarter of spending).

Both parties acknowledge the need for spending cuts, the only argument is when. They both aim to reduce the deficit, Labour claim by half in four years, the Tories an unspecified, but no doubt small, amount more. So thats approximately £80bn worth of cuts needed, to only halve the deficit.

I repeat again, last year the government spent £167bn more than it took in. And yet the biggest election issue so far is a poxy $6bn here or there. You’re going to have to do better than that!


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