Friday, 10 March 2017

The budget's National Insurance change

I must admit that even I thought that this government had broken an election promise for no reason. I still think that it was a bloody stupid thing to do but at least I know the reasoning now. Of course the reasons weren't made clear by the BBC, instead I had to rely upon who quoted the Chancellor of the Exchequer's speech:

'An employee earning £32,000 will incur between him and his employer £6,170 of National Insurance Contributions. A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.

Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits.

But with the introduction of the new state pension, these differences have been very substantially reduced.

Since 2016 self-employed workers now build up the same entitlement to the state pension as employees, a big pension boost to the self-employed.

The most significant remaining area of difference is in relation to parental benefits, and I can announce today that we will consult in the summer on options to address the disparities in this area as the FSB and others have proposed.

Mr Deputy Speaker, The difference in National Insurance Contributions is no longer justified by the difference in benefits entitlement.The abolition of Class 2 NICs for self-employed people, announced by my predecessor in 2016 and due to take effect in 2018, would further increase the gap between employment and self-employment….from April 2018, when the Class 2 NIC is abolished, the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019.

The combination of the abolition of Class 2 and the Class 4 increases I have announced today, raises a net £145m a year for our public services by 2021-22,an average of around 60p a week per self-employed person in this country.'

The reasons are logical and it's interesting that the BBC happily push the government to increase benefits for people without considering how they will be paid for, just like the Labour Party that they act as the propaganda arm of.

However from a presentational point of view and indeed from a tactical position, this was a very clumsy announcement. It's almost as though this Conservative government want to once again be portrayed as 'the nasty party'.

Quote taken from here

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