[Closed] National Insurance and business leaders

Of course it is
They always claim things will cost jobs

It's a bit like whenever a truck full of something edible is stolen - it's usually poisonous for some reason

They might be really concerned about employment figures, but seeing as "a number" of them donate to the Conservative party, and really all they're concerned with is the share price and profit that the companies that they look after maintain, and mostly they want capitalism to apply to their workers and not to them, then yes, perhaps The Turkey/Xmas analogy is not too far wide of the mark...

to some extent yes, but Id add that 1) business leaders succeed not just by improving (or protecting) margins but by growth - if capacity for growth is at all restricted (and we're talking here over the whole economy by a matter of percentage points not individual businesses, you can always find evidence that a single tax rise wont effect a particular company, but over the wider economy individual tax rises/structural changes have a kind of smeared effect) then it neither favours them nor the employees or wider economy.

and 2) national insurance is not a tax on profit, it is a tax on production so it adds to the cost base of the company rather than the cost base of the shareholder. Employees should care much more about the former than the latter.

you ready for your NI bill to go up then nick? 😉

Such is the paucity of the wages I pay, it would make a teeny difference to my monthly bill... 8)

you slave trader, you!

🙂

But I like your philanthropy no matter how tiny 😉

slight hijack

are we walking/riding/doing something soon..?

So are there any economists willing to put their cocks on the blocks and work out how cutting public sector waste (which may be frittered needlessly or not but is at least spent) or saving on NI would affect the economy as I reckon the business leaders didnt get rich by giving all their money away to employees or spending it all. At least public sector wastage is all spent.

nick - good idea. will pm you later.

a_a - there really isnt such a thing as public sector waste, there are just different views on the level of necessity for a service to be efficiently delivered by the state and what level of necessity of services can be efficiently delivered by the private sector.

I dont buy the "saving waste" argument, but I do believe in a smaller state expenditure. One about 40% of GDP static. Labour's structural deficit has taken our state expenditure well over that amount even if tax revenue has remained about the same level. (the balance obviously being funded more disproportionately by tomorrow's taxpayers)

If the chancellor thought that corporations could carry a larger burden of the national debt he should have the balls to increase corporation tax, not get tax employees and employment.

I [to be exact, the wife] employ 5

Not too sure how we're going to handle it but I think we'll probably give them a choice of the 1% extra NI or the company will absorb it - via extra pay raise
Everyone [except me 🙁 ]gets a twice yearly profit related bonus so they may suffer slightly then unless we can up the ante a bit

We'll see but 1% won't kill us

uplink for every 10 (or more realistically hundred or thousand) companies that can take the 1 % there will be one that cant and the NI rise will be the business cost to push them over. Its not the time to be burdening 60% of the nation's economy with an additional operating cost cost.

What makes you think that not implementing the NI increase would be taking money out of the economy? The money doesn't disappear if the NI increase isn't applied its just that you and I now have a choice whether to spend or save the 1% and if we choose to spend it we have a choice what to spend it on instead of, as you put it, it being frittering needlessly on public sector wastage. My bet is that at the moment most if it is being spent not saved.

if we choose to spend it we have a choice what to spend it on instead of, as you put it, it being frittering needlessly on public sector wastage.

My point is money goes in when the gov spend it and its paid to people as wages or business for goods and services. Business saving the 1% NI wont spend it all.... my original question I thought was simple but much like all the politicians people dont seem to like answering it

a_a - there really isnt such a thing as public sector waste, there are just different views on the level of necessity for a service to be efficiently delivered by the state and what level of necessity of services can be efficiently delivered by the private sector.

Indeed but I was trying to prevent a rabid right wing rant by taking away their ammo

Whether it's the right or wrong time to do it, I don't think it's high on the list of peoples election priorities like the Tories seem to be making out.

The company I work for have changed the way that we pay our pension to salary sacrifice (i.e. they pay all of our pension contributions and reduce our salray by the extra amount they are now paying, they save money on employers NI and we pay less NI meaing we actually take more home), the savings have offset the increases in NI but there is now even less going into the pot to pay for the people who can't be arsed to get a job to pay for their flatscreen telly.
I suspect that a lot of companies will be going down this route to avoid the increase.

OK yes they have a vested interest in not seeing extra cost loaded onto their businesses but that doesn't make their argument any less valid. As Stoner pointed out although most businesses can afford it to some it might mean putting the brakes on growth or worse.

What's wrong with the occasional rabid right wing rant? There's enough left wing rants on here

'Fat cats come out in support of Tory boys shocker' 🙄

Basic economics says that if you raise taxes, you reduce growth.

Get more deeply into things, and you'll start to read about the multiplier effect. In normal circumstances, government spending has a disproportionate impact, £1 spent by HMG may work out creating £1.5 worth of difference to aggregate demand (ie, driving growth, multiplier is 1.5 in this case) as it trickles down. So you can bump start things along a bit by spending some cash.

However, in a situation like ours (ie, massive deficit), the multiplier can become less than 1, purely due to the fact that the population know that the spending must be paid for sooner or later. In other words, when you're up shit creek, government spending stimulates consumer saving to such an extent that you would have been better keeping the money in your pocket.

So I think it would be wisest to avoid raising tax (and therefore cut spending, as we're working in a deficit).

If you don't believe in the value of the expectations of the man in the street, I direct you to the independence of the BoE, and the effect that's had on inflation & interest rates. It's driven for a large part by consumer expectations of how well controlled inflation will be.

headfirst - I think that's a little disingenuous of you. Afterall if, as you believe, the fat cats are devious enough to covet their income so much youd think theyd find a way of doing so regardless of the tax environment of their companies. I think its much more likely and far less doom-mongering to assume that this many business leaders consider NI increases to be detrimental to the growth prospects of the business not only as the payers of their bonuses and salary but also their employees livelihoods.

The caricaturisation of all bosses being self-serving fat cats is insulting. Take nickc for example! 😉

Oh, and as for bosses, top exec pay has increased massively in recent times, whilst worker's pay has struggled to keep up with inflation. Their pay won't suffer.

Stoner - I don't have the numbers but couldn't a lot of those business leaders that are complaining about it just cut there contribution to the Tories?

Basic economics says that if you raise taxes, you reduce growth.

Thats a bit simplistic isnt it, as government spending stimulates the economy too. What i'd like to know is will the tory cuts do more or less damage to the economy than labour tax.

However, in a situation like ours (ie, massive deficit), the multiplier can become less than 1, purely due to the fact that the population know that the spending must be paid for sooner or later. In other words, when you're up shit creek, government spending stimulates consumer saving to such an extent that you would have been better keeping the money in your pocket.

Do you have evidence for this or is it just someone/your opinion?

uplink, based on the numbers involved ( http://politics.guardian.co.uk/conservatives/tables/0,,641830,00.html) relative to the national NI budget and the fact that bosses donate their own money not the company's unless they are principal shareholders (in which case frankly it's their company money to do what they like with) I think there's little link between the Tory donations and the company's welfare 🙂

I think there's little link between the Tory donations and the company's welfare

no, but there may well be a link between the companies donations & the Tories welfare 😉

Incredible piece of selective quoting there. Did you even read second paragraph?

Do you have evidence for this or is it just someone/your opinion?

Have a look at: Sutherland, A. 1997 “Fiscal crises and Aggregate Demand: Can high public debt reverse the effects of fiscal policy?” Journal of Public Economics, Vol 65 No 1

I suspect if you have a root around there will have been some more research since that was published.

a_a - an introduction to the Fiscal Multiplier is here:
http://en.wikipedia.org/wiki/Fiscal_multiplier

uncontested empirical analysis is much harder to find for some reason 😉

no, but there may well be a link between the compan[b]y's bosses[/b] donations & the Tories welfare

corrected that for you. And now I agree. 😉

Sutherland, A. 1997 “Fiscal crises and Aggregate Demand: Can high public debt reverse the effects of fiscal policy?” Journal of Public Economics, Vol 65 No 1

Not particularly helpful as I no longer have access to e journals.

so the introduction to the fiscal multiplier states that many dont agree with it. Economics seems very much built around what people believe to me. Its hard to know what to think. Obviously increased taxation wont help but niether will reducing public spending.

[i]Economics seems very much built around what people believe[/i]

I don't believe in economics. 😉

a_a - you've pretty much hit it on the head. There was a very good editorial in the finance section of the Guardian the other day you ought to read. Ill go and find it...

but you believe in the tractor stats comrade eh? 😉

[i]the tractor stats[/i]

I learn & repeat them, mantra-like.

http://www.guardian.co.uk/business/2010/apr/05/rescuing-economics-from-crisis

It's more important to strip away the layers of complexity that gave big-picture economics a spurious and dangerous exactitude in advance of the crisis. The big lesson in economics from Keynes is that we know less than we think we do, and that there is a vast difference between the output of economic models and the actual behaviour of individuals.

I confess my whole training and commercial experience is based in the use of empirical models. I need to continually reflect on my approach to my subject to stop relying too much on "dangerous exactitude". One of my sayings I often give to clients is that Id rather be approximately correct than precisely wrong...

Bet you cant guess who taught me A level economics!!

Guess I'll just vote like I always do, ie for anyone who will beat the Tories as they seem an unlikeable bunch.

for anyone who will beat the Tories as they seem an unlikeable bunch.

it seems as rational an approach as anyone else in STWland 🙂

Bet you cant guess who taught me A level economics!!

[i]One of my sayings I often give to clients is that Id rather be approximately correct than precisely wrong...[/i]

You're a born archaeologist, Stoner - you just don't know it yet.

I just [i]know[/i] you'd love the bayesian modelling of radiocarbon dates, and the ongoing difficulties with calibration curves. Take it up as a hobby. 😀

Bet you cant guess who taught me A level economics!!

should I be able to?

Labour MP, former minister, husbands a porn fiend

I've been away and now I'm back

The caricaturisation of all bosses being self-serving fat cats is insulting. Take nickc for example!

I did not suggest all bosses are self-serving fat cats, just all of those who have come out to debunk Labour's NI plans. I don't have the exact figure, but I'm pretty sure that the % of the aforesaid rotund felines who are donators to the Tories is much higher than in the general population of 'business leaders', particularly those of SMEs.

If you seriously think they are donating millions to a political party 'for the good of society in general' then you, sir, are being very naive.

The multiplier effect depends on people's marginal propensity to save, their marginal propensity to buy imported goods and services, and the marginal rate of taxation across the economy. These all vary over time and hence estimating a value for the multiplier is very hard at the best of times. (All my own words)

Economics has been called the miserable science for a reason....

Just spotted this on one of the Graun's comment sections and felt it worth sharing;

The left always thinks the answer is for the government to spend more. In good times because you can, and in bad times because Keynes said so.

oh you're local to me then?

I can almost see her old school from the pub window where Im sitting 🙂

headfirst - the fiscal multiplier, even more complicatedly, varies by the tax that it is attributed to.

As for SME bosses not being represented by the donations of larger company bosses have you not thought that it might be that SME bosses dont have the disposable income to make political donations but still feel the same way as those that do?

Your in a pub in Hagley? You poor sod. I grew up in belbroughton

🙂 not quite. Im in malvern, above the school she studied in, not the one that she taught in.

Did she fling her tits about at school too?

CFH - I like that one, but really we need TJ's opinion on it. bring it out again on another thread when he's in full flow!

Did she fling her tits about at school too?

Not in my direction anyway!!

The left always thinks the answer is for the government to spend more. In good times because you can, and in bad times because Keynes said so.

The right always thinks the way to solve problems is to cut back. In the good times because there's no need for it and in the bad times because all those "benefit scroungers" should be in jobs that don't exist.

So easy to make sweeping statements.

I personally think that the 'reduce govt wastage' thing is just waffle. Therefore, someone's got to stump up the cash to help the economy out.

Does anyone know if wages have fallen during the recession? If so, the employers would be getting a bargain on employment costs, so a rise in NI would seem entirely reasonable.. no?

I personally think that the 'reduce govt wastage' thing is just waffle. Therefore, someone's got to stump up the cash to help the economy out.

It's a sort of lie from the Tories, quite how they are going to work through the whole system of Government and identify what can be saved in such a sensible way and do it quickly...so it's going to be a straight forward slash at something big.

Does anyone know if wages have fallen during the recession? If so, the employers would be getting a bargain on employment costs, so a rise in NI would seem entirely reasonable.. no?

It's not a simple as that, although It's not a surprise they are whinging, because they did during the good times when they were making obscene profits.

This is simply about the ideology of small Vs large Government. If the tories win then we will go down the road of smaller state more privatisation and probably more Quangos. I was hoping that people would have learned the lesson of the 80's/90's when the tories brought the NHS to it's knee's, but it seems that they have had a bit of a memory loss and the lesson needs to be learned all over again.

And perhaps one day we will get the balance right between state and the private sector, but I'm not holding my breath with so many convenience libertarians around.

[i]I'm not holding my breath with so many libertarians around.[/i]

We can use them to staff frontline services: "let me through - I'm [i]highly trained[/i] in spouting vague platitudes about the market!" 😈

Edit: I'm actually of a reasonably libertarian, er, bent. But as regards UK healthcare, Hewitt's lobby-whoring is [sadly] the clearest indication of the future, whatever the incoming administration: NHS assets and infrastructure up for grabs.

Are these business leaders that are claiming massive job losses if the NI increase goes ahead the same ones that were lined up - one after another - to claim that the introduction of a minimum wage would cost the UK 2m jobs?

The lesson from previous recessions is that cutting spending deepens and lengthens the recession. As for the NI increase - well they would say that wouldn't they - 2 reasons - it cuts into profits and its a club to beat labour with.

The tories claim there is a huge amount of savings they can make without damaging services - an load of twadddle. So either you continue to spend at the level we do and wait for recovery to start to balance to books - or cut spending putting us back into recession.

The lesson from previous recessions is that cutting spending deepens and lengthens the recession.

The prime object of any trading nation, is to maximise its wealth so that this can be distributed in as equitable a way as possible, without it our ambitions are no more than pipe dreams - the more cake there is, the bigger the slice everyone can have! The nurturing of our wealth-giving system should therefore be of absolute importance - but not for Labour, their obsession has always been on spending, not earning!

As the chief executive of Next said in the Times today:

To get a grip on my senses I performed a small reality check. I started by thinking about the principle involved. And the principle is desperately important. Should the State raise its revenues to match its profligate lifestyle or make efficiency savings to get its expenditure back in line with its revenue? Do we want a big, expensive and inefficient State or a smaller, less intrusive, more efficient one?

There are no efficiency savings on the scale suggested - cutting cost will mean cutting services - which means putting people out of work.

Be honest about it it. There is an argument that this is the right thing to do ( but not one I subscribe to) But to suggest that spending can be cut significantly without affecting services is simply wrong.

Do we want a big, expensive and inefficient State or a smaller, less intrusive, more efficient one?

Actually means do we want comprehensive services to improve the health and welfare of our population or do we want minimal services that cannot cope?

What we want is more state owned tractor plants comrade.

Do we want a big, expensive and inefficient State or a smaller, less intrusive, more efficient one?

is obvious, but how do we know the smaller one would be more eficient, and more efficient doesnt necessarily mean it can do as much, it might just do less cheaper.

the more cake there is, the bigger the slice everyone can have!

Which are the rich countries that allow everyone to have a big slice of cake?

Actually means do we want comprehensive services to improve the health and welfare of our population

Really - so, jobs for [url= http://jobs.guardian.co.uk/job/982438/senior-press-officer/ ]Senior press officers for the arts council[/url] are an important place for the Government to invest our money to improve health and welfare are they TJ?

Well if they are putting money into the arts council, they will want someone to pulicise the art produced and thereby reduce the need for that artist to rely on gov funding the next time wont they? Oh and a lot of arts council work involves improving health and welfare, such as plays being put on to take round schools about drugs etc...

Zulu - I would say yes - but even if you remove all of that type of job the savings will be minimal - remember you are making them unemployed so that they will have to be paid benefit so the saving is only a % of their salary. The vast bulk of public spending is in health / welfare, education and armed services

then they have less money to spend - so the local shopkeepers income goes down - so he pays less tax......

You could close every non essential public service and the savings would still not be anywhere near what callmedave claims

I'm pretty sure I remember hearing that the Tories will not cut arts spending as its so low anyway

Are these business leaders that are claiming massive job losses if the NI increase goes ahead the same ones that were lined up - one after another - to claim that the introduction of a minimum wage would cost the UK 2m jobs?

Exactly what I was going to say.

Really - so, jobs for Senior press officers for the arts council are an important place for the Government to invest our money to improve health and welfare are they TJ?

UK creative industries are actually one of our few remaining healthy exports - also there are strong links between creative expression and good health, welfare etc.

Taking a misguided short term view of what constitutes efficiency based on tabloid style ill-informed speculation - yup that sounds just like what the Tories are planning.

The bottom line is that we're all ****ed.

There was an economist on Radio 4 yesterday saying that the government borrowing requirement for the next few years is equivalent to about £3000 per person, per year.

The hike in NI will raise the equivalent of £100 per person, per year.

Methinks we're going to have considerably bigger issues to moan about than a 1% NI increase pretty soon (as in: the day after the election when reality is due to make a rather abrupt re-entry into all our lives)

- the more cake there is, the bigger the slice everyone can have!

In theory. In practise, you have to forcibly re-distribute some of it because the people in power will hoard as much as possible for themselves. Which is where Labour comes in - both historically and politically.

I would like to see how many of these companies that are protesting against the proposed N.I rise are Tory party funders in the first place, I'm guessing probably most of them.

Binners - I think the idea is that a re-growing economy will contribute a large amount of money. Hence the emphasis on not killing it.

I suspect that most of the signatories to the NI letter are the same people who said they would take their business overseas if a labour government were elected in 97. But didn't.

And can regularly be heard bleating the same threat over and over, ad nausem when anyone dares to threaten there right to do whatever the * they like without any recourse to wider society.

Well.... * em!!!

molgrips - Member

Binners - I think the idea is that a re-growing economy will contribute a large amount of money. Hence the emphasis on not killing it.

Indeed - the only way to rebalance is to grow the economy - the debate is about which way is the best way to do so.

Remeber the lessons of the 30s and 80s. IMO - don't cut spending.

Remeber the lessons of the 30s and 80s. IMO - don't cut spending.

So you're telling me that tax rises are the way to stimulate the economy TJ?

under certain circumstances it could work, however the point is the balance between cutting spending which will harm the economy and increasing taxation which will harm the economy. Labour want to cut by £3 for every £1 taken whereas Tories want to cut by £4 for every £1, so in that case increasing taxation could be better than keeping tax the same and cutting spending more.

The Tories are always trying to play the 'job tax' card

They claimed the the hunting ban would cost 10s of thousands of jobs - it didn't
They claimed the minimum wage would cost 2m jobs - it didn't

Zulu - I am saying don't cut spending - thats the lesson from history.

Its a clear choice - as the economy grows pay back the debt slowly or cut spending, put the economy back into recession, be forced to increase spending on paying benefits, wait a few years until the money can be started to be paid back then you can pay it back more quickly . In the mean time you have destroyed the social cohesion of the country.

learn the lessons from the 30s and the 80s

In the mean time you have destroyed the social cohesion of the country.

Think Maggie finished that off quite nicely in the 80s.

grum - thats the lesson from the 80s - and this time there is not the north sea oil money to spend on benefits

But thats not whats being promised by the parties is it TJ

Neue-arbeit are offering us a Tax rise, in the form of an increase in NI contributions, the Conservatives and the Business leaders are saying this will damage the economy/endanger the recovery.

Your position is that we can just carry on spending and put it on the never never...

[i]"The problem with socialism is that, sooner or later, you run out of other people's money"[/i]

Zulu, what would cutting spending do to the economy?

Problem is the real information is lost amongst spin and hype. What are we to do?

anagallis, what would raising taxes do to the economy?

Your position is that we can just carry on spending and put it on the never never...

correct - because the lesson from history is that this is the right way to do it. It can be paid back from recovery - as the economy recovers there will be arise in tax receipts that will allow the debt to be repaid.

As for the NI rise - its a marginal rise and a progressive one - its damaging effects will be far lower than the Tories cuts in spending. - IMO - as 20 economists you will get 20 answers. I follow Keynes myself as I believe history vindicates his ideas.

Remeber the huge public spending of the Thatcher years - all being wasted on paying people not to work. We don't want to go back there

I simply believe that tory spending cuts will take us into a double dip depression that will be deep and lasting and very damaging.

So Zulu - what do you think we should be doing?

both would have a negative effect, that was understood from the start of the thread, the point is trying to get a handle on which will have the bigger effect, you cannot use the tax raise arguement or the cutting spending argument in isolation. If you wish to get all party political then you can bugger off somewhere else. This thread about trying to find a way through the bullshit