The fiscal multiplier in action

From City AM:

THE PLANNED cut in national insurance payments for employers is making one in three small- to medium-sized companies more optimistic about hiring staff, according to figures out today.

Chancellor George Osborne said in his March Budget that the government will waive the first £2,000 on employers' national insurance bills from April 2014. The so-called employment allowance is set to save companies £5.9bn between 2014 and 2018 and a third of employers will no longer pay national insurance contributions, according to government estimates.

Why would it encourage small businesses to take on a significant number of additional employees? If anything, it's a big incentive for a small employer to stay below the £2,000 threshold, which is quickly reached - that would only cover the Employer's NIC on one employee paid £22,000 per annum, on two paid £15,000 or on three paid £13,000. Beyond that, the marginal cost of employing people is exactly the same as it ever was.

But most galling is this bit of fiscal multiplication right at the end:

National insurance, a tax paid by both workers and employers, funds certain state benefits, pensions and the NHS. The coalition has attempted to reform the levy since being elected three years ago.

Does it f-ck!!

From memory, NI raises just over £100 billion a year. State pensions are £90 billion a year, the NHS costs well over £100 billion a year and there's another couple of £ billion for contributory Jobseeker's Allowance. So it covers pensions and a bit of working age benefits but it certainly does not magically pay for the NHS as well. It wouldn't even pay for the NHS in isolation.

And no, the coagulation has not "attempted to reform the levy", they cheerfully bumped up the total rate from 23.8% to 25.8% of gross earnings and left it at that. Sod the employers and employees, those nasty grubby little people who have to engage in free exchange of goods and services in order to make a living.