From the BBC:
Social care must be adequately funded, Justice Secretary Robert Buckland has said, amid reports ministers plan to raise national insurance. Downing Street did not deny reports of an increase of at least 1% to improve social care and tackle the NHS backlog.
The justice secretary said he would not "speculate" but said there should be a "grown-up conversation" about how to pay for rising social care costs. "The British public are sensible enough to know that when it comes to the issue of social care we have to find some way in which it will be adequately funded," Mr Buckland told BBC Breakfast.
The move would break a Tory manifesto commitment at the last election. He said that the Conservative Party had also promised at the 2019 election that it would bring forward sustainable proposals to fund social care.
The Daily Telegraph reports that Downing Street favours a 1% rise in the national insurance rate, affecting about 25 million workers and self-employed people, as well as employers. But it says the Treasury is pushing for a 1.25% increase. And the Times adds that Health and Social Care Secretary Sajid Javid wants a bigger rise of 2%.
For the sake of this post, I will assume that the rumours are correct.
"National Insurance" is one of the biggest con-tricks ever. It's just tax, it's a super-tax of over 20% on employment income and a lower super-tax of 9% for people with moderate self-employment income (it's only 1% on high self-employment income).
Social care is the government's responsibility for the simple reason that people seem to assume it is, it is self-fulfilling, so fair enough, and thus it has to be paid for out of taxes (short of the obvious alternative, stop wasting so much money on crap and dishing out billions to ministers' friends and families).
Somehow, National Insurance isn't really seen as a tax (a bit like VAT). In popular myth it only goes towards wholesome stuff like old age pensions, the NHS, unemployment benefit and now social care. On top of that, pensioners genuinely appear to believe that they paid for their own pensions, even though it's actually today's taxpayers who are funding them. If you add up all the things on which people believe National Insurance is spent, it is about double the amount it actually raises.
And people don't seem to mind or even remember. Gordon Brown hiked it by 2% back in 2003/04 and planned to hike it again by 2% in 2010, but he lost he election. The incoming Tories did it anyway. Was there a big outcry? Not that I remember. And they stuck 2.5% on VAT, nobody cared. So the Tories' are likely to pull the same sneaky trick again.
What's even more insane is that when Philip Hammond wanted to up self-employed National Insurance from 9% to 10% (still less than half of what employees bear), there was a huge outcry and he backed down.
Final thought - the additional tax they hope to raise from this appears to be about £3 billion, so why not put a ten percent surcharge on Council Tax and just call it 'National Insurance' and see if people mind?
Put On Your Big Boy Pants, Maybe?
30 minutes ago
25 comments:
We left the EU in December 2020. So why hasn't the EU VAT tax been scrapped? A sales tax at 20% is effing outrageous. When I was a child it was 6% and just a sales tax with 25% on, luxury goods, I think. I have asked my MP the same question. Several weeks ago. No answer as yet.
I suspect that 1% on NI, which retired people do not pay, signals that the triple lock will also be chopped.
They are going to offset it by removing the need to sell your house to pay for social care, so- it’s alright for homeowners
Dr E, excellent idea. VAT is the most damaging tax of all. That was one reason for voting Leave. Realistically, the Tories were never going to scrap or reduce VAT, they love it because land and housing is exempt.
D, hmm, maybe. But the pensioner voting bloc is very strong and upmost in politicians' minds.
TH, oh excellent, so they are depriving some people of their property (earnings) in order to subsidise land owners?
I'm almost convinced that dropping the voting age to 16 is a good thing.
B, I see what you mean. Old enough to pay tax? You're old enough to vote.
And it won't raise a bean. IMHO we are at 'peak Laffer' now.
"What's even more insane is that when Philip Hammond wanted to up self-employed National Insurance from 9% to 10% (still less than half of what employees bear), there was a huge outcry and he backed down."
Which just goes to show that taxation levels are not governed by revenue maximisation, but by what the electorate will bear. The government extracts the maximum tax it can get away with, then spends the minimum it can get away with on "schools 'n' hospitals" and blows the rest on "crap and dishing out billions to ministers' friends and families". We are no longer governed by ethics, we are governed by fear of retribution, of which, frankly, there is none.
L, we at peak Laffer or getting close to it. A sane government would want to be safely on the left hand, upward bit, just to have a margin of error.
B, depressing but true. So why don't people vote for a lower tax party, for similar level of services, achieved by cutting out waste and corruption? Which must be going on for 30% of spending. Even if it's only 10%, that's still a lot of money.
Mark, probably because people don't like to have to think too hard, which means voting for one of the bigger parties, Blue Tory, Red Tory, Tartan Tory, Yellow Tory or Green and none of them are offering a lower tax platform. Also old people, who are more likely to vote, still remember a time when politicians had at least some ethics and haven't caught up with decline of ethics that has been going on since WWII and don't want to think that we have gone back to the amorality of 200 years ago. Even my generation were brought up to believe in progress, when what we have now is mainly regress.
Bayard. Quite
There is little coherent analysis anywhere apart from on this site. All the increase will end up being paid by employers. Thus it will add to the cost of public services including of course the NHS.
Funny the government could have raised the revenue with a national component to the Council Tax, all without breaking manifesto committments.
P, "Thus it will add to the cost of public services including of course the NHS"
There is NIC on NHS staff wages, but the government is 'paying' that money to itself, so it ought to largely cancel out.
The answer is of course always LVT, but we already knew that.
@DrEvil
I did some calculations which showed that two-thirds of VAT revenue disappears in costs and losses. Someone corrected me and showed that only half the VAT revenue disappears. However I have a sneaky feeling that scrapping VAT would result in no loss of revenue at all to the exchequer. Some of the VAT is churned ie people given taxpayers' money to pay their VAT with.
VAT is largely a tax on business as it puts pressure on retailers to absorb it in order to maintain volumes of sales. At the margin it means that businesses are tipped into unprofitability. This gives rise to a deadweight loss which, at a conservative estimate cannot be less than 5% of GDP. This in turn results in losses of other tax revenue and adds to welfare costs.
The gross yield from VAT is currently about £135billion. Losses from fraud and evasion are about 10%. If you can think of a worse tax please come up with your suggestion.
Ph, worse taxes? Robin Hood transactions tax? "Progressive consumption tax" (whatever that is).
Ignoring the practical stuff, massive compliance costs, massive fraud, necessity for higher public sector wages and benefits...
I estimate deadweight loss at the overall tax rate to the power three.
42% (basic rate tax and NIC) ^ 3 = 7.5%
52% (VAT plus basic rate tax and NIC) ^ 3% = 14%
So pure deadweight loss is around 6.5%, double it for all the other crap = 13%.
Whether the govt. would get it in higher revenues or we just have more money to spend, that's £130 billion down the toilet every year, just vanished.
Mark, why is a transactions tax so bad? It is always being touted on things like social media, I suspect, largely, because the touts fondly imagine that it would be paid by rich financiers, which of course it wouldn't.
OK, so we all seem to agree it's a terrible idea. Again.
Have you considered the possibility all the hard work you are putting in, probably for the rest of your life, is going to be a total loss?
And is it time to start looking at it all with a rathe less limited view of the world?
I hear you. That would mean giving up your ideology, your facts, your beliefs. These are extremely cosy things to guard. Right?
Whatever you tax, you get less of. The British government destroyed the country's clock industry in just one year, 1797, by imposing a tax on clocks. It was repealed the following year but the industry, previously the world leaders, never recovered. The Swiss were the main winners for that piece of folly.
Transactions are the basis of economic activity since prehistoric times.
@physiocrat to be fair, the guild of watchmakers was a protected monopoly. So good riddance
P, I think the idea behind the transaction tax is that fewer transactions would be a Good Thing, in that the whole finance industry is extractive, zero sum and creates no added value.
I know about the watch tax, I have a monument to it hanging on my wall.
Does anyone on this forum, and other ideological action groups, ever wonder how their huge effort and intellect never makes progress?
Don't take this as a complaint.
I'm curious why so much time and effort is continuously put into a failing enterprise? And there's zero effort put into looking into root cause
B, sure, banks are largely blood suckers. But they can easily circumvent Transaction Taxes.
Far better just to have a Bank Asset Tax - the result would be they shrink their bloated and largely fictitious and/or made up of reckless lending balance sheets down to a core of truly profitable and secure loans at rate of interest higher than whatever the BAT rate is (I say 2%).
RS, why don't you just tell us the Root Cause?
Mr. Wandsworth
I'm asking that all of us start looking for root cause... authentically... for the first time. I've been looking for 10 years since I saw what a total sham political, economic, scientific and reform movements are, even the best of them,including Georgism. And am looking for partners but they are rare because of the systemic cowardice crossing the spectrum.
You seem to be avoiding it like the plandemic because it's too hard. Rather that attending to it because it's such a brilliant challenge
So I do not know the answer. I do have an idea it's not material world based, but psychological and related to the entire collective of people. Using science too. But get cancelled because of it's psychic content. No one is brave enough to accept these facts I've found. Very much like we see with climate change fanatics.
Your brothers seem to have rendered that stuff into the land of mumbo jumbo. As has our so called science and the church of logic and reason. The Grand Inquisitor. Google that.
Do you get my point? Are you willing to man up and start looking there? Happy to talk more. But I suspect you feel god will punish you if you go into it
RS, "So I do not know the answer"
Get back to us when you've sussed it out.
Mr. Wadsworth
You were either speed reading, you have no balls or the answer I did actually give to you was the wrong answer(very much KLN)
Do you really want your children to regard you as the mediocrity who turned away when they could have acted?
Come on MW, take up the challenge. Stop believing in your God and it's protectionism for just a few seconds, and ask me about it.
See if you have the balls for it. I realise how difficult it is for a believer, afraid to know.
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