Conservative credibility on the economy took another step backwards today, with the announcement that they will reverse the planned 1% rise in national insurance.
Now I don’t think much of Labour’s strategy either; for all their pleadings that it was the global markets, the fact is that they were complicit in cheering on the bankers as they got us into this mess. The Tories were the bankers of course; politically, both parties were fighting over the goose that seemed to be laying golden eggs. “Feed it more” they were saying, “force the corn down its neck!”. When the poor thing went and died of liver failure, both parties had egg on their faces. And Gordon Brown, in his time as Chancellor, lost control of government spending. The political infighting in Tony Blair’s cabinet, and of course the disastrous war, meant that ministers weren’t managing their departments properly. But this is all in the past; we are where we are, deep in a recession – if not technically (there is some token growth in the economy) certainly practically, as far as jobs and the “feelgood factor” are concerned. And, come what may, we are going to have to pay more taxes and spend less.
National Insurance is the worst sort of stealth tax, particularly the employers’ share. In my opinion, it should be abolished, and added on to income tax instead, with all employers required to increase salaries, as part of the transitional programme, to compensate for the change. The argument is simply transparency; it’s an income tax in all but name, so it should be called income tax. (Separately, I also think that income tax should be replaced by a cashflow tax; but that’s another question). But, with a deficit the size it is, you can’t just promise to cut any tax without making some compensatory changes. Since the Tories don’t plan on adding any other taxes, they must plan on cutting more, and they’ll be sure to pick on those vague “efficiency savings”.
It won’t do. Whatever cuts do come are going to be hard to implement. Efficiency savings ultimately mean civil service redundancies and cuts in services somewhere along the line. Right now, it’s higher taxes that are needed.