Who pays the piper?

Chancellor Alistair Darling tried very hard in yesterdays pre budget report to convince the world at large that it is the very wealthy in our society who will meet the cost of the recent economic events. The real way in which the cost will be met becomes very apparent when you read the small print.

Alistair Darling announced a 0.5% increase in the rate of both employees and employers National Insurance effective from April 2011. What he did not immediately make clear was whether this was a confirmation of the increase already announced in the last budget or a further increase.

An examination of the press releases confirms however that the 0.5% increase announced today is in addition to the previous increase.

This means that from April 2011 employees and employers National Insurance will both go up by 1%. The expected take from this 1% increase is some £8.6 billion. By comparison the expected tax take form the much publicised bank payroll tax is a mere £5.5 million. Even the increased tax rate on those earning more that £150,000 per annum is only expected to raise £1.1 billion.

What this clearly demonstrates is that the only way for the country to get out of the current economic turmoil is for the entire population to pay more tax.

A major concern must of course be that this additional levy will be a strong disincentive to employers taking on new employees. Let us all hope that this proves not to be the case.

There is no doubt that employers will be looking even harder for any legitimate ways of reducing this further substantial increase in the NIC burden.

For further comments on the Pre-Budget Repor I attach a link to my firm's commentary and suggested actions
http://tiny.cc/ae9rH