National Insurance: Why all the fuss?

So, a 1p increase in NI from next year is suddenly the big election issue. Endless business leaders attack the proposal as 'a tax on jobs', and the Tories would 'partially' reverse the decision.

What a nonsense. No business that I've been involved in has ever made decisions on the basis of marginal changes in tax rates. The best-run businesses, large or small, don't fiddle around the edges with their costs. Do we honestly believe that M&S are altering their recruitment plans at this point? Of course not!

I suspect the the fuss simply reflects a much deeper set of issues that 

sets the private and public sectors at odds with each other. In business, when it looks like the sh*t is hitting the fan, you move quickly. At one company I was involved with, we took pay cuts and laid off 40% of the staff to ensure survival. But Big Government can't and won't work that way, and there's a deep frustration amongst business leaders that Government doesn't look very sharp at running its affairs. This frustration doesn't get a lot of airtime, and the net result is a very timid debate.

But there's something even bigger at play here. I've just taken a look at official spending stats for the past decade. In 2000, Government spending was £339 bn and 35% of GDP. This year it is £661 bn and 47% of GDP. Those figures are only slightly more amazing than the fact that our debt has risen from £345Bn to £777bn over that same period. And yet both parties and half the FTSE100 are talking about a 1% variance in NI!

Comments

[Eric Woods]

Chris

Agree with you about the sterile nature of much of the NI debate. Part of the problem is that the government made a commitment to not raising income tax in order to deflect any tax-and-spend attacks from the Conservatives. It seems obvious that in order to address the current crisis we need to raise taxes and make cuts, but the level of debate remains pretty poor. Neither side will address big ticket items (like Trident) and keeping selling us the fairy dust of efficiency savings that have no impact on services. (And don't get me started on the idea of throwing in a tax benefits just for getting married!).

One point about the rise in government spending - arguably the figure in 2000 was too low, following years of under-investment in hospitals, schools and transport infrastructure (And Labour of course stuck to Conservative spending limits for the first 2 years of government).

I'd suggest that its not a question of berating the public sector for not being like the private sector - it's about looking at how the public sector can be organised as a 21st, not a 19th century service (and arguably that means starting with the systems of governance and political direction).

Eric