National Insurance and business leaders

isnt this just the same as turkeys saying they dont actually like christmas?

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 company's bosses 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.

Economics seems very much built around what people believe

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? 😉

the tractor stats

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!!

should I be able to?

One of my sayings I often give to clients is that Id rather be approximately correct than precisely wrong…

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

I just know 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….