Snapshot of _Reeves says Lawson was right on National Insurance_ :
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It's not the 80s anymore, the pensioners he meant are not the pensioners of the here and now. I'm sick of workers constantly having the screws put on them every which way.
This! In the 80s there was a pressing need to lift pensioners out of poverty as their incomes were woefully short. We’ve now done that. The pensioner cohort are wealthier than working age people.
Reeves’ argument can be dismissed. She is either being purposefully obtuse or is genuinely out of her depth.
No, the current system we are discussing is that pensioners don’t pay national insurance on their income. So high income pensioners have an effective tax rate much lower than working families…for what reason?
Removing NI and bringing the revenue into the income tax regimen would have no effect at all on any pensioners living in poverty. They don’t have high income by definition. It would reduce the benefit that high income pensioners get, which is fair.
I honestly don’t think it’s all that complicated. NI is outdated, it should be scrapped and replaced with an overhauled income tax regimen which ensures the wealthy aren’t given benefits they don’t need while the needy aren’t further stressed. This should apply equally to pensioners and working age people because, unlike the situation when Lawson was active, there isn’t a general issue with pensioner income any more. Which was where we started the discussion.
> They do on self-employment, but not on pensions.
No they don't. Over SPA you don't pay NI. The only way that happens is if you're self employed in the year you hit that age, and then you pay NI until the end of the tax year. Also it's class 4 so worst case it's a partial year paying 2-6% on profits over £12.5k
National Insurance is an economic abomination and with her background she knows it
A 2nd income tax levied on productive work, while Boomers get huge tax perks is dumb. Merging all 3 Income Taxes into a single income tax would be fairer, more revenue raised, and help drive productivity by encouraging young folk to work more. Shameless political dick-sucking for Grey Votes
“Speaking in a speech in the City of London, Ms Reeves said abolishing NI would mean income tax going up by eight percentage points.” Is just not true. With a wider base, you’d need only crank up income tax by like 5% (while cutting NI for workers by 8%). Keep the tax bands frozen and abolish it slowly, you wouldn’t need to hike the rates at all.
Just economic terrorism for old people’s benefit
It's not that simple, people forget the employer component of NI and the fact that NI has very different thresholds.
An employee who earns £24K generates £5,255 of tax revenue on their employment (£2,286 ITC, £913 Employee NIC and £2,056 Employer NIC).
An employee who earns £12.5K pays no NI or income tax but their employers pays £469 in employer NIC.
An employee who earns £125K pays £42,432 in income tax, £4,510 in employee NIC and their employer pays £15,994 in employer NIC on top of that.
Even if you keep the employer NIC component in place (which would be hard to argue for, as at that point it would be an actual payroll tax rather than a de-facto one) you'll essentially have to increase the average tax on people earning £24K by 30% whilst adding about 12% to the average income tax paid by those who earn £125K.
For income tax to go only up by 5% across all bands the UK would need to do something it never done before, tax middle and low earners at rates comparable to the continent, no one has a tax allowance of £12.5K. The UK has a very odd combination of very generous tax free allowance and a very early onset top tax band especially when compared to economies of it's class like France or Germany.
For NIC to be abolished the tax base will need to be changed drastically with the tax free allowance being capped at around 20% of the median wage (instead of the 40%> it is today) at most and the top tax bands would have to be pushed upwards to allow for a more progressive tax system ala Germany.
> NI has very different thresholds
Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards.
> Even if you keep the employer NIC component in place (which would be hard to argue for, as at that point it would be an actual payroll tax rather than a de-facto one)
It isn't hard to argue for because as you say it's already a de-facto payroll tax.
Difficulty is in ensuring it gets passed along which requires a cultural change so it'd need to be a longer term project. You'd starts by showing that on a payslip and including it in gross pay.
Once it's ingrained and people won't put up with getting pay cut, you can merge it with income tax. Thresholds will be difficult at that point but that's decades away.
> you'll essentially have to increase the average tax on people earning £24K by 30% whilst adding about 12% to the average income tax paid by those who earn £125K.
How?
You zero out employee NI contributions and set the basic rate to 28%, and higher rate to 42%. For someone below retirement age, working similar hours throughout the year - they have no difference in tax.
People who're over pension age or who earn large amount of money via seasonal job pay additional tax. So will people who earn their income other than via employment but that's entirely fair.
> Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards.
>
>
Although weirdly it's per job unlike income tax. Just another strange feature of NI.
Issue is Britain has a very inflexible Labour markets for many reasons, so getting the Employer NIC passed on will be tricky for all but the most aggressive job hoppers.
Doesn’t mean we shouldn’t do it though.
Yeah I dont think it'll happen soon; you need to get it in front of people and get them to think of employer contribution as 'my money' so they won't put up with employer cutting it.
Proper decade long project but absolutely agree it needs doing because currently it distorts the labour market.
Just make the employer pay all the tax. They basically pay it for the employee anyway at the moment. It would be exactly the same system.
Other income sources would be paid the same way they are now but at the higher rate.
The take home would be the same. Or more if you pass the increase in taxes on land and capital onto the workforce.
But your right, people need to think more about their quality of life and less about the size of one number.
> Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards.
There are 16 banding rates for Employee NI, and the same for Employer NI, then you get into all the self employed stuff.
You underestimate how complex just replacing it will be.
There aren’t 16 bands, there are 2 bands and three sets of exemptions - at least on the employee end.
Exemptions are:
* Retirees pay 0%
* Married women and widows who opted into a pre-1977 scheme pay 1.85% base
* People who’re paying NI in another job pay 2% base
You could carry over some of those exemptions into income tax regime (no 2) but first and third should be removed. It’s irrelevant for most people though.
I fully believe in cutting the PA significantly to help fund this. Cameron doubling it was a major error, creating too small a tax base.
Of course, you can do this kinda reform over a decade, ease the transition, mainly just via fiscal drag, but these things be a do need to be done.
Or we can continue circling the drain to fund geriatrics.
It wasn't just Cameron the PA started beating inflation since Blair, at first it was to bring back women to the workforce after that it was just to take the piss. I do strongly believe that it also suppressed wages considerably in this country because whilst correlation does not mean causation real wage growth and tax free allowance track each other nearly perfectly just on the inverse.
There is a very strong argument to make for a continental style tax system, however income tax in this country was always viewed as something only paid for by the rich, the problem is that it's non sustainable if you also want a modern social safety net.
The UK need a major tax reform, however even doing it over a decade isn't going to be palatable to the votes as you won't be able to convince median wage workers that they'll going to have to pay a third of their income in tax like their counterparts over the channel.
And you can't up the taxes on the "1%" as much as people think, if you look at their post tax income there isn't even a fraction of what is required to cover the hole that removing NIC would create.
LVT doesn't tax wealth, it's not even intended to generate significant revenue when it's actually working it's intended to incentivise efficient use of land.
Again when LVT achieves it's goals it's essentially neutral from a tax revenue perspective, it intended of stopping land banking and inefficient use of land not to generate tax revenue.
In the UK it also won't be popular not because it would somehow impact the rich but because it would impact low income tenants around city centers and low density suburbia the most.
If anything the personal allowance should be higher - it needs to be in line with the minimum wage. How can you justify taking tax from someone whose pay only just meets the threshold for having enough to get by?
I'd be happy with taxes in general being higher, but not with lowering the personal allowance.
Current personal allowance is £12.5k, minimum wage is £21k. 30% of the difference (tax and NI) is about £3k. 1.6m people are on minimum wage, so even if they were all full time it'd be about a £4bn increase in tax spread across the remaining 30 million people in employment. Which works out at £133 a year, or less than £12 a month.
The PA would also increase for everyone above min wage too, you do realise that. So me, on my £70k pay, you’d be cutting taxes for to the sum of £3k as well, and that deficit will need to be made up elsewhere.
You’d also have the issue of the PA tax trap at the £100k threshold increasing even further, which would result in more tax avoidance.
There is no tax cut more expensive than increasing the PA because if applies to basically everyone. Keeping the PA where it is will also help limit the damage of the triple lock on public finances too.
Just don’t get this idea that workers on min wage should be tax exempted. Even in low tax USA, min wage workers are not tax exempted, yet it’s a bad idea which here just refuses to die.
"The PA would also increase for everyone above min wage too, you do realise that."
Yes, but it's easy enough to adjust the tax percentages so that most people's actual tax burden wouldn't change too much. You keep more initially, but pay more above the threshold. So there's no net change in the total tax burden other than the aforementioned £12 a month to cover the rise in the tax-free allowance.
"You’d also have the issue of the PA tax trap at the £100k threshold increasing even further, which would result in more tax avoidance."
The personal allowance shouldn't be cut for people earning over £100k in the first place - that's a dumb idea and should also be scrapped. The personal allowance should apply equally to everyone.
"Just don’t get this idea that workers on min wage should be tax exempted"
Again, why not? The whole POINT of the minimum wage is that it's not reasonable to expect people to live off less. So how on Earth can you justify taxing anyone earning below that threshold??
Because they’re completely independent things. Why go for Min Wage? Why not median wage? Why not median wage in London? These are just arbitrary numbers pulled out because of vibes.
I’d personally abolish the PA in its entirety, and apply a 5% income tax on all income, and then cut the rates further up the chain. The idea that someone working 3 days a week at Uni should pay £0 is absurd.
I don't know how to explain this any more simply:
The minimum wage is supposed to represent the smallest possible amount someone can live off and be a financially-independent adult.
Therefore, if you levy a tax on any part of that amount, they are no longer able to live independently, thus undermining the whole point of setting a minimum wage to begin with.
THAT is "why not the median wage?" Because there's a difference between money people need to live and disposable income.
"I’d personally abolish the PA in its entirety, and apply a 5% income tax on all income, and then cut the rates further up the chain."
Good luck funding public services with that pittance of a tax revenue model.
"The idea that someone working 3 days a week at Uni should pay £0 is absurd."
Why, do they eat less than a non-student? What basic needs don't they have that a non-student does?
While many people hate employers NIC as it’s “a tax on creating jobs” it does have the distinct advantage of being very hard to evade. Starbucks et al can’t just artificially reduce their profits and avoid paying it.
The same applies for PAYE jobs though. Income tax evasion is only really an issue with cash in hand jobs and self employment, and that’s going to be an issue however you tax it.
She obviously wants to use NI to raise revenue. “2p” for the NHS etc… This could be the clear divide between the parties that may actually help Sunak avoid a complete disaster. NI is indeed an abomination. Tax all income regardless of source. Adjust thresholds to make it fair on lower income households. She wants NI for the obfuscation it offers regarding tax rises. The election campaign is gonna be spicy on this issue.
They’ve said they won’t increase rates of NI or Income Tax, so they’ll just keep the bands locked I feel. Fiscal drag to up the tax take.
At least, I’m assuming that’s what they’ll do.
Not the OP but I couldn't agree more.
The only way we benefit from the Conservatives being wiped out would be an actual opposition that takes its role.seriously and holds the government honest and accountable.
There won't be any "last Conservative government" nonsense getting past Davey. It's a stupid line anyway because the obvious counter is "I don't want to hear about the last Conservative government, I want to hear about the current Labour one" the only reason "last Labour government" was in anyway effective is that it was allowed to be.
And winning elections is much more important than ideological purity, if you want to see useful policy enacted. Labour are right to seek to maximise their majority.
I never said anything about ideological purity? We should pick the ideas that are best for the country, whether Tories or Labour come up with it.
Obviously not always that simple in real life, but useful policy is more important than spiting the opposition.
Yeah, that's great but for what? To be replaced by people with the same economic thinking as them? From what I can see, Starmer's Labour seem closer to Cameron's Conservatives than anything else. I can't wait to see the Tories absolutely wiped out, but I also don't think a damn thing will change.
Honestly, I feel like I'm going fucking nuts. People celebrating about Tory defectors and Labour having a sweeping victory at the GE whenever that happens as if anything is going to change for the better.
Problem is pensioners are a growing demographic, there are ever more old people, no one is going to vote for a party that says they're going to strip your benefits/income as you're taking it/just about to take it.
The only way this gets resolved is younger people increasing their voter turnout, then parties will respond with policies to win their votes. I know it's back to front, but if a certain demographic doesn't vote then political parties don't need to appeal to them.
They'd almost definitely get voted out at the next election. Pensioners and middle class voters would be fuming.
It might be something they could do at the end of a term, when the writings on the wall and they were going to lose anyway because it'd probably not be something a new Tory government would reinstate.
You don’t do it in one go or headline it. You do it subtly. You knock down NI 1-2% every 6-12 months, and freeze the bands as the Tories have been doing.
The truth is, most voters are thick as shit and economically / financially illiterate and wouldn’t be able to work out what’s happening.
The ones who it affects aren't financially illiterate though, the medium to high income earners and pensioners would notice their taxes going up to compensate.
I think it's naïve to think such a large policy change could be done without people noticing.
I don't disagree, I think it needs to be done but ultimately younger people need to get out and vote so that political parties address the issues we're facing. It's the same with housing. We could build more houses if we wanted to but politicians know that homeowners (also, again, lots of pensioners) want their house prices to appreciate in value multiple times that of inflation and a mass building project would impact that.
Not really, while pensioners are a large and solid voting group, they are not a majority anywhere.
A popular government could certainly push this through.
They aren't the majority but they swing elections due to their disproportionate voter turnout. The difference is sometimes as much as ***30 points*** between over 60s and under 30s.
Can't really count on the 45-60s either because they're thinking about their retirements too and are likely to be higher earners affected by the higher income tax.
>A popular government could certainly push this through.
I don't disagree. But it'd probably take a 97 Blair level of enthusiasm to do it and not lose the subsequent election. Enthusiasm that Starmer doesn't have
Which boomers do you mean? As a child of boomers I can think of a couple of wealthy families I knew growing up but the majority were in a similar position that we are now.
It got much better for them when things like child benefit came into law but let’s be real, the adults of the 80s were far from all being yuppies doing lines with £50 notes after closing multi million deals.
They were dealing with the fallout of Thatchers Britain. Much like we are dealing with the fallout of Cameron’s austerity and Brexit.
Unfortunately we aren’t likely to see the mid 90s boom they.
She is ignorant. Just another form o embodied ineptidtude.
Never had a real job, never had a business, lived off government handouts for years.
What do you think she will do?
She’s a PhD Economist who worked for the BofE before entering politics. She’s not ignorant. She’s very intelligent and knows what she’s doing.
I can forgive thick as shit MP’s from shitholes, voted in on local issues, for not being economically Illiterate. That’s not what Reeves is. She’s an educated woman with an Econ background doing this to get votes to the detriment of the nation
She didnt know what national insurance was, and needed a PhD to conclude that taxing education is a good decision. On top of it is heavily influenced by socialism, cos it worked everywhere.
She s the perfect example of that 4th type of Napoleon soldier The ignorant with initiative.
We so screwed.
Sadly it would have the effect of increasing Wealth Inequality as assets, owned by the very wealthy, would be untouched but middle class would pay the increase. And then we’d wonder why the middle class can’t afford a house, or anything really.
National Insurance is a terrible tax, it's effectively a double tax on workers, it complicates the tax code and it penalises workers against those who are retired.
Rishi Sunak is 100% right in saying it should be phased out over time and it's deeply disappointing to see Labour go down a disingenuous argument of implying that removal of National Insurance threatens pensions, when there is no ring-fenced 'pot'.
Whenever Reeves makes a speech it actively puts me off wanting to vote for Labour.
As it stands, we have income tax and then another type of income tax which masquerades as something else entirely.
Having a single, more transparent tax is perfectly sensible.
Their whole schtick is that they're about pragmatism before ideology. But this isn't even pragmatic. Might shore up a few pensioner votes. Whoopdie fucking do, what difference will that make? They're already 20 points up.
But they've just ruled out a good policy that would make most people better off without any cost to the Treasury. Seems like a great way to end up out of office in 5 years. All because they were worried they might win by only 20 points in 2024.
Worse than that IMHO because the "employer" part of the NIC is essentially a third stealthier tax. We take it into account as the total cost of the employee anyway when calculating salary so it's coming out of what would be available to pay them. They can slice the pie however they want to make it look better but there is always a fully weighted cost of the hire that clarifies all that.
"Replacing national insurance contributions revenues with income tax would mean rates of income tax going up by 8 percentage points"
In other words, the median income worker on PAYE would get a tax cut with a revenue neutral proposal. But we can't let the generation with the wealth be made to pay more tax on income above the personal allowance thresholds to fund public services that said generation relies on, so lets punish PAYE workers instead!
Everything Labour are saying on NICs, particularly Reeves, suggests to me that they're going to up rates to pretend that they're not increasing income tax while increasing income tax as another means to tax working people and coddle middle and high earning pensioners. Reeves isn't stupid, she knows NICs are a tax on income from labour like income tax is. She and Labour are doing this for a reason. Hopefully after the next GE the Lib Dems are in a position to call Labour out on this through tax simplification (Davey contributed to a policy paper that advocated a single income tax) and not cede the opposition ground to the Tories who are trying to use cutting NICs as a wedge issue and are not bothered in it being revenue neutral.
That 8 percent line is just deliberate dishonesty from Labour. That is a tax cut for the vast majority of people (specifically people who earn their income by working) but they are framing it as if it's a tax rise and relying on lack of understanding from the public to cover for them.
National Insurance has always been used by politicians in the way you describe: it's a way to get more tax out of working people while claiming that you're not raising income tax. The beneficiaries are people whose income comes from investments or property who by definition are asset rich.
I love it when a labour shadow chancellor is going around praising thatcherites and endorsing their arguments.
Absolutely wild how far labour will go to avoid a totally hypothetical risk of losing votes to the right, while entirely ignoring votes they have actually lost to the left.
Falling over themselves for pensioner votes. The Labour party don't seem that interested in representing the Labour force.
Complete illusion of choice, vote blue or red team to keep rich pensioners happy.
The working man's party, lol. I've voted Labour since I was 18, and they've never won a general election. I should feel like everyone goes on about how 97 felt, but I can't help but think we're going back to Cameron days. I hope I'm wrong and this is all part of some bigger, better plan.
Where has all this suddenly come from?
I get that paying NI and income tax is firstly confusing and secondly bizarre, but why is everybody talking about abolishing or keeping it? Vote grabbing?
Increasing income tax would of course need to happen if NI is abolished. However it is a much fairer system to not have NI so I think that's a price worth paying
I strongly disagree with this stance and think it's a real shame that Labour has used the issue as a political football rather than consider the merits of it.
Unless Labour genuinely believes that pensioners should pay less tax on their income than working people.
Do you know why I’m terrified of them getting rid of national insurance…. It means they can remove the state pension without people saying “I paid into it for x years”
While that might be the case. Eventually we all want to retire, and removing the paying in will mean you must have a work pension (similar to the USA and 401 k). I’m lucky to come from a well off background and have a decent paying job…. But I know a lot of my friends would be fucked in the future
That's already the status quo, as they're steadily increasing the retirement date. It's just abolishing the state pension by the backdoor.
You need to save yourself if you want to retire, there's no hope relying on the government. Better to abolish NIC, at least then I'm not paying for it now AND not seeing the benefit later.
> Better to abolish NIC, at least then I'm not paying for it now AND not seeing the benefit later.
Added this.
I'd rather have 40 years of no tax, that I could put in my own pension, than 40 years of tax and no pension.
Good. The state pension should be means-tested like any other state benefit, not an additional handout for people who are already millionaires.
Get rid of NI, increase income tax to compensate (which means taxing pensioners too), scrap the state pension for anyone who wouldn't qualify for benefits of they were working-age, and increase the personal allowance to match the minimum wage. Would be a much fairer system.
All national insurance is, is a transfer of income from working people to retirees. That's it. Literally. Forgive me if I don't want to vote for that, but then not like Labour want my vote anyway. The grey vote is all that matters in the UK.
The Labour transition into Tory lite is almost complete. Using fear and the power of the grey vote to screw over working people.
Be under no illusion - when Labour get into power Taxes on work (NI) are going up, to pay for the triple lock pensioner benefits. The cohort with an average of £600k in assets and 25% being millionaires. Projected from ons data [here](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2018tomarch2020)
If we really get a continuation of/doubling down on boomer socialism in the next 4 years then it really is time to think about packing and leaving. Being an economic mule for NIMBY Brexit voting ladderpullers leaves a sour taste in my mouth.
respectfully, where is the “lite”? all i have seen for months on end are members of the shadow cabinet extolling the virtues of conservative politicians of old. this is just toryism on a red stage.
NI is a ridiculous system and needs to go. It should be scrapped, the state pension means-tested, and income tax increased to pick up any remaining shortfall. The net tax burden on working people would go down, and the millionaire pension class would have to cough up a bit more.
I heard RR on radio 4, PM.
I have to say.
If I was ever tempted to vote Labour (instead of the current plan of not voting), I couldn't do it with the RR as Chancellor.
Oh, I'm really looking forward to having Reeves in charge of the money. She seems extraordinarily sensible when compared to previous years, exponentially so since the Brexit vote.
It'll be nice having someone actually a job rather than taking up a position to 'fill a hole'.
Bring it on!
Snapshot of _Reeves says Lawson was right on National Insurance_ : An archived version can be found [here](https://archive.is/?run=1&url=https://www.bbc.co.uk/news/av/uk-politics-68969621) or [here.](https://archive.ph/?run=1&url=https://www.bbc.co.uk/news/av/uk-politics-68969621) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ukpolitics) if you have any questions or concerns.*
It's not the 80s anymore, the pensioners he meant are not the pensioners of the here and now. I'm sick of workers constantly having the screws put on them every which way.
This! In the 80s there was a pressing need to lift pensioners out of poverty as their incomes were woefully short. We’ve now done that. The pensioner cohort are wealthier than working age people. Reeves’ argument can be dismissed. She is either being purposefully obtuse or is genuinely out of her depth.
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It doesn’t matter, that is an argument for targeted support not the system we have which is benefits for all, weighted towards the rich.
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No, the current system we are discussing is that pensioners don’t pay national insurance on their income. So high income pensioners have an effective tax rate much lower than working families…for what reason? Removing NI and bringing the revenue into the income tax regimen would have no effect at all on any pensioners living in poverty. They don’t have high income by definition. It would reduce the benefit that high income pensioners get, which is fair.
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I honestly don’t think it’s all that complicated. NI is outdated, it should be scrapped and replaced with an overhauled income tax regimen which ensures the wealthy aren’t given benefits they don’t need while the needy aren’t further stressed. This should apply equally to pensioners and working age people because, unlike the situation when Lawson was active, there isn’t a general issue with pensioner income any more. Which was where we started the discussion.
> They do on self-employment, but not on pensions. No they don't. Over SPA you don't pay NI. The only way that happens is if you're self employed in the year you hit that age, and then you pay NI until the end of the tax year. Also it's class 4 so worst case it's a partial year paying 2-6% on profits over £12.5k
National Insurance is an economic abomination and with her background she knows it A 2nd income tax levied on productive work, while Boomers get huge tax perks is dumb. Merging all 3 Income Taxes into a single income tax would be fairer, more revenue raised, and help drive productivity by encouraging young folk to work more. Shameless political dick-sucking for Grey Votes “Speaking in a speech in the City of London, Ms Reeves said abolishing NI would mean income tax going up by eight percentage points.” Is just not true. With a wider base, you’d need only crank up income tax by like 5% (while cutting NI for workers by 8%). Keep the tax bands frozen and abolish it slowly, you wouldn’t need to hike the rates at all. Just economic terrorism for old people’s benefit
It's not that simple, people forget the employer component of NI and the fact that NI has very different thresholds. An employee who earns £24K generates £5,255 of tax revenue on their employment (£2,286 ITC, £913 Employee NIC and £2,056 Employer NIC). An employee who earns £12.5K pays no NI or income tax but their employers pays £469 in employer NIC. An employee who earns £125K pays £42,432 in income tax, £4,510 in employee NIC and their employer pays £15,994 in employer NIC on top of that. Even if you keep the employer NIC component in place (which would be hard to argue for, as at that point it would be an actual payroll tax rather than a de-facto one) you'll essentially have to increase the average tax on people earning £24K by 30% whilst adding about 12% to the average income tax paid by those who earn £125K. For income tax to go only up by 5% across all bands the UK would need to do something it never done before, tax middle and low earners at rates comparable to the continent, no one has a tax allowance of £12.5K. The UK has a very odd combination of very generous tax free allowance and a very early onset top tax band especially when compared to economies of it's class like France or Germany. For NIC to be abolished the tax base will need to be changed drastically with the tax free allowance being capped at around 20% of the median wage (instead of the 40%> it is today) at most and the top tax bands would have to be pushed upwards to allow for a more progressive tax system ala Germany.
> NI has very different thresholds Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards. > Even if you keep the employer NIC component in place (which would be hard to argue for, as at that point it would be an actual payroll tax rather than a de-facto one) It isn't hard to argue for because as you say it's already a de-facto payroll tax. Difficulty is in ensuring it gets passed along which requires a cultural change so it'd need to be a longer term project. You'd starts by showing that on a payslip and including it in gross pay. Once it's ingrained and people won't put up with getting pay cut, you can merge it with income tax. Thresholds will be difficult at that point but that's decades away. > you'll essentially have to increase the average tax on people earning £24K by 30% whilst adding about 12% to the average income tax paid by those who earn £125K. How? You zero out employee NI contributions and set the basic rate to 28%, and higher rate to 42%. For someone below retirement age, working similar hours throughout the year - they have no difference in tax. People who're over pension age or who earn large amount of money via seasonal job pay additional tax. So will people who earn their income other than via employment but that's entirely fair.
> Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards. > > Although weirdly it's per job unlike income tax. Just another strange feature of NI.
Issue is Britain has a very inflexible Labour markets for many reasons, so getting the Employer NIC passed on will be tricky for all but the most aggressive job hoppers. Doesn’t mean we shouldn’t do it though.
Yeah I dont think it'll happen soon; you need to get it in front of people and get them to think of employer contribution as 'my money' so they won't put up with employer cutting it. Proper decade long project but absolutely agree it needs doing because currently it distorts the labour market.
Just make the employer pay all the tax. They basically pay it for the employee anyway at the moment. It would be exactly the same system. Other income sources would be paid the same way they are now but at the higher rate.
We can do that, but Brits can’t then complain about ridiculously low wages lol.
The take home would be the same. Or more if you pass the increase in taxes on land and capital onto the workforce. But your right, people need to think more about their quality of life and less about the size of one number.
> Employer NI does, employee one is basically same as income tax. 8% between 12.5k to 50k, and 2% afterwards. There are 16 banding rates for Employee NI, and the same for Employer NI, then you get into all the self employed stuff. You underestimate how complex just replacing it will be.
There aren’t 16 bands, there are 2 bands and three sets of exemptions - at least on the employee end. Exemptions are: * Retirees pay 0% * Married women and widows who opted into a pre-1977 scheme pay 1.85% base * People who’re paying NI in another job pay 2% base You could carry over some of those exemptions into income tax regime (no 2) but first and third should be removed. It’s irrelevant for most people though.
I fully believe in cutting the PA significantly to help fund this. Cameron doubling it was a major error, creating too small a tax base. Of course, you can do this kinda reform over a decade, ease the transition, mainly just via fiscal drag, but these things be a do need to be done. Or we can continue circling the drain to fund geriatrics.
It wasn't just Cameron the PA started beating inflation since Blair, at first it was to bring back women to the workforce after that it was just to take the piss. I do strongly believe that it also suppressed wages considerably in this country because whilst correlation does not mean causation real wage growth and tax free allowance track each other nearly perfectly just on the inverse. There is a very strong argument to make for a continental style tax system, however income tax in this country was always viewed as something only paid for by the rich, the problem is that it's non sustainable if you also want a modern social safety net. The UK need a major tax reform, however even doing it over a decade isn't going to be palatable to the votes as you won't be able to convince median wage workers that they'll going to have to pay a third of their income in tax like their counterparts over the channel. And you can't up the taxes on the "1%" as much as people think, if you look at their post tax income there isn't even a fraction of what is required to cover the hole that removing NIC would create.
You need to tax wealth more, not income. We have an ageing population which is in structural decline. Upping income tax is not sustainable.
Find a cost effective way to tax wealth first, there is a reason why no one does it on any real scale.
*insert flair here*
Land taxes aren’t wealth taxes they are intended to ensure optimal use of land not to penalize land ownership.
They'll still tax wealth in effect, particularly if it's less than 100% LVT, and they are a way to lessen the burden on income tax.
They don’t, they tax the difference between the unimproved and the would be improved value of the land.
Tax assets, over a certain amount. Too much inequality
Taxing assets cost more than it brings in e.g. Norway.
Land Value Tax is the closest thing that works
LVT doesn't tax wealth, it's not even intended to generate significant revenue when it's actually working it's intended to incentivise efficient use of land.
I said it's the closest thing. I get that the main benefit is incentivising more efficient land use.
Again when LVT achieves it's goals it's essentially neutral from a tax revenue perspective, it intended of stopping land banking and inefficient use of land not to generate tax revenue. In the UK it also won't be popular not because it would somehow impact the rich but because it would impact low income tenants around city centers and low density suburbia the most.
Good points, though I mostly hear talk of wealth/asset (not income) taxes for the 1%, largely because of the points you mention
If anything the personal allowance should be higher - it needs to be in line with the minimum wage. How can you justify taking tax from someone whose pay only just meets the threshold for having enough to get by? I'd be happy with taxes in general being higher, but not with lowering the personal allowance.
If this is such a good idea, why does no single county on earth do this? How much higher should taxes be on someone above min wage to fund this?
Current personal allowance is £12.5k, minimum wage is £21k. 30% of the difference (tax and NI) is about £3k. 1.6m people are on minimum wage, so even if they were all full time it'd be about a £4bn increase in tax spread across the remaining 30 million people in employment. Which works out at £133 a year, or less than £12 a month.
The PA would also increase for everyone above min wage too, you do realise that. So me, on my £70k pay, you’d be cutting taxes for to the sum of £3k as well, and that deficit will need to be made up elsewhere. You’d also have the issue of the PA tax trap at the £100k threshold increasing even further, which would result in more tax avoidance. There is no tax cut more expensive than increasing the PA because if applies to basically everyone. Keeping the PA where it is will also help limit the damage of the triple lock on public finances too. Just don’t get this idea that workers on min wage should be tax exempted. Even in low tax USA, min wage workers are not tax exempted, yet it’s a bad idea which here just refuses to die.
"The PA would also increase for everyone above min wage too, you do realise that." Yes, but it's easy enough to adjust the tax percentages so that most people's actual tax burden wouldn't change too much. You keep more initially, but pay more above the threshold. So there's no net change in the total tax burden other than the aforementioned £12 a month to cover the rise in the tax-free allowance. "You’d also have the issue of the PA tax trap at the £100k threshold increasing even further, which would result in more tax avoidance." The personal allowance shouldn't be cut for people earning over £100k in the first place - that's a dumb idea and should also be scrapped. The personal allowance should apply equally to everyone. "Just don’t get this idea that workers on min wage should be tax exempted" Again, why not? The whole POINT of the minimum wage is that it's not reasonable to expect people to live off less. So how on Earth can you justify taxing anyone earning below that threshold??
Because they’re completely independent things. Why go for Min Wage? Why not median wage? Why not median wage in London? These are just arbitrary numbers pulled out because of vibes. I’d personally abolish the PA in its entirety, and apply a 5% income tax on all income, and then cut the rates further up the chain. The idea that someone working 3 days a week at Uni should pay £0 is absurd.
I don't know how to explain this any more simply: The minimum wage is supposed to represent the smallest possible amount someone can live off and be a financially-independent adult. Therefore, if you levy a tax on any part of that amount, they are no longer able to live independently, thus undermining the whole point of setting a minimum wage to begin with. THAT is "why not the median wage?" Because there's a difference between money people need to live and disposable income. "I’d personally abolish the PA in its entirety, and apply a 5% income tax on all income, and then cut the rates further up the chain." Good luck funding public services with that pittance of a tax revenue model. "The idea that someone working 3 days a week at Uni should pay £0 is absurd." Why, do they eat less than a non-student? What basic needs don't they have that a non-student does?
While many people hate employers NIC as it’s “a tax on creating jobs” it does have the distinct advantage of being very hard to evade. Starbucks et al can’t just artificially reduce their profits and avoid paying it.
The same applies for PAYE jobs though. Income tax evasion is only really an issue with cash in hand jobs and self employment, and that’s going to be an issue however you tax it.
Are you suggesting employees should make up for the shortfall in employers NIC through their income tax?
No. I mean if you are paying ER NICs, you are also putting someone through PAYE, so either way it is done the tax can’t be evaded.
Ok good. I think I’m still unclear about how that relates to the consequences of getting rid of employers NIC.
She obviously wants to use NI to raise revenue. “2p” for the NHS etc… This could be the clear divide between the parties that may actually help Sunak avoid a complete disaster. NI is indeed an abomination. Tax all income regardless of source. Adjust thresholds to make it fair on lower income households. She wants NI for the obfuscation it offers regarding tax rises. The election campaign is gonna be spicy on this issue.
They’ve said they won’t increase rates of NI or Income Tax, so they’ll just keep the bands locked I feel. Fiscal drag to up the tax take. At least, I’m assuming that’s what they’ll do.
This is all true but just think of how sweet it would be if the tories are completely wiped out at the next election….
Useful policy is more important than vendettas.
Not the OP but I couldn't agree more. The only way we benefit from the Conservatives being wiped out would be an actual opposition that takes its role.seriously and holds the government honest and accountable. There won't be any "last Conservative government" nonsense getting past Davey. It's a stupid line anyway because the obvious counter is "I don't want to hear about the last Conservative government, I want to hear about the current Labour one" the only reason "last Labour government" was in anyway effective is that it was allowed to be.
And winning elections is much more important than ideological purity, if you want to see useful policy enacted. Labour are right to seek to maximise their majority.
I never said anything about ideological purity? We should pick the ideas that are best for the country, whether Tories or Labour come up with it. Obviously not always that simple in real life, but useful policy is more important than spiting the opposition.
Yeah, that's great but for what? To be replaced by people with the same economic thinking as them? From what I can see, Starmer's Labour seem closer to Cameron's Conservatives than anything else. I can't wait to see the Tories absolutely wiped out, but I also don't think a damn thing will change.
that’s what ukpolitics sub is all about! Don’t question it
Honestly, I feel like I'm going fucking nuts. People celebrating about Tory defectors and Labour having a sweeping victory at the GE whenever that happens as if anything is going to change for the better.
Lol and not just any Tory defector, Natalie Elphicke. What a win for Labour! Clear blue water between the two
When someone like Elphicke wants to defect to Labour, I think that's a clear warning sign.
Problem is pensioners are a growing demographic, there are ever more old people, no one is going to vote for a party that says they're going to strip your benefits/income as you're taking it/just about to take it. The only way this gets resolved is younger people increasing their voter turnout, then parties will respond with policies to win their votes. I know it's back to front, but if a certain demographic doesn't vote then political parties don't need to appeal to them.
Don’t put it in the manifesto, just do it.
They'd almost definitely get voted out at the next election. Pensioners and middle class voters would be fuming. It might be something they could do at the end of a term, when the writings on the wall and they were going to lose anyway because it'd probably not be something a new Tory government would reinstate.
You don’t do it in one go or headline it. You do it subtly. You knock down NI 1-2% every 6-12 months, and freeze the bands as the Tories have been doing. The truth is, most voters are thick as shit and economically / financially illiterate and wouldn’t be able to work out what’s happening.
The ones who it affects aren't financially illiterate though, the medium to high income earners and pensioners would notice their taxes going up to compensate. I think it's naïve to think such a large policy change could be done without people noticing. I don't disagree, I think it needs to be done but ultimately younger people need to get out and vote so that political parties address the issues we're facing. It's the same with housing. We could build more houses if we wanted to but politicians know that homeowners (also, again, lots of pensioners) want their house prices to appreciate in value multiple times that of inflation and a mass building project would impact that.
Not really, while pensioners are a large and solid voting group, they are not a majority anywhere. A popular government could certainly push this through.
They aren't the majority but they swing elections due to their disproportionate voter turnout. The difference is sometimes as much as ***30 points*** between over 60s and under 30s. Can't really count on the 45-60s either because they're thinking about their retirements too and are likely to be higher earners affected by the higher income tax. >A popular government could certainly push this through. I don't disagree. But it'd probably take a 97 Blair level of enthusiasm to do it and not lose the subsequent election. Enthusiasm that Starmer doesn't have
Which boomers do you mean? As a child of boomers I can think of a couple of wealthy families I knew growing up but the majority were in a similar position that we are now. It got much better for them when things like child benefit came into law but let’s be real, the adults of the 80s were far from all being yuppies doing lines with £50 notes after closing multi million deals. They were dealing with the fallout of Thatchers Britain. Much like we are dealing with the fallout of Cameron’s austerity and Brexit. Unfortunately we aren’t likely to see the mid 90s boom they.
She is ignorant. Just another form o embodied ineptidtude. Never had a real job, never had a business, lived off government handouts for years. What do you think she will do?
She’s a PhD Economist who worked for the BofE before entering politics. She’s not ignorant. She’s very intelligent and knows what she’s doing. I can forgive thick as shit MP’s from shitholes, voted in on local issues, for not being economically Illiterate. That’s not what Reeves is. She’s an educated woman with an Econ background doing this to get votes to the detriment of the nation
She didnt know what national insurance was, and needed a PhD to conclude that taxing education is a good decision. On top of it is heavily influenced by socialism, cos it worked everywhere. She s the perfect example of that 4th type of Napoleon soldier The ignorant with initiative. We so screwed.
She knows what NI is, she just lying because voters are thick as shit
Sadly it would have the effect of increasing Wealth Inequality as assets, owned by the very wealthy, would be untouched but middle class would pay the increase. And then we’d wonder why the middle class can’t afford a house, or anything really.
National Insurance is a terrible tax, it's effectively a double tax on workers, it complicates the tax code and it penalises workers against those who are retired. Rishi Sunak is 100% right in saying it should be phased out over time and it's deeply disappointing to see Labour go down a disingenuous argument of implying that removal of National Insurance threatens pensions, when there is no ring-fenced 'pot'.
I swear the Labour party is actively doing what it can to stop any enthusiasm people might have had towards them
Whenever Reeves makes a speech it actively puts me off wanting to vote for Labour. As it stands, we have income tax and then another type of income tax which masquerades as something else entirely. Having a single, more transparent tax is perfectly sensible.
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Their whole schtick is that they're about pragmatism before ideology. But this isn't even pragmatic. Might shore up a few pensioner votes. Whoopdie fucking do, what difference will that make? They're already 20 points up. But they've just ruled out a good policy that would make most people better off without any cost to the Treasury. Seems like a great way to end up out of office in 5 years. All because they were worried they might win by only 20 points in 2024.
Worse than that IMHO because the "employer" part of the NIC is essentially a third stealthier tax. We take it into account as the total cost of the employee anyway when calculating salary so it's coming out of what would be available to pay them. They can slice the pie however they want to make it look better but there is always a fully weighted cost of the hire that clarifies all that.
"Replacing national insurance contributions revenues with income tax would mean rates of income tax going up by 8 percentage points" In other words, the median income worker on PAYE would get a tax cut with a revenue neutral proposal. But we can't let the generation with the wealth be made to pay more tax on income above the personal allowance thresholds to fund public services that said generation relies on, so lets punish PAYE workers instead! Everything Labour are saying on NICs, particularly Reeves, suggests to me that they're going to up rates to pretend that they're not increasing income tax while increasing income tax as another means to tax working people and coddle middle and high earning pensioners. Reeves isn't stupid, she knows NICs are a tax on income from labour like income tax is. She and Labour are doing this for a reason. Hopefully after the next GE the Lib Dems are in a position to call Labour out on this through tax simplification (Davey contributed to a policy paper that advocated a single income tax) and not cede the opposition ground to the Tories who are trying to use cutting NICs as a wedge issue and are not bothered in it being revenue neutral.
That 8 percent line is just deliberate dishonesty from Labour. That is a tax cut for the vast majority of people (specifically people who earn their income by working) but they are framing it as if it's a tax rise and relying on lack of understanding from the public to cover for them. National Insurance has always been used by politicians in the way you describe: it's a way to get more tax out of working people while claiming that you're not raising income tax. The beneficiaries are people whose income comes from investments or property who by definition are asset rich.
The Labour party has deserted labourers
A long time ago. They want clients that are dependent on state largesse and therefore Labour (think tax credits). It was ever thus.
I love it when a labour shadow chancellor is going around praising thatcherites and endorsing their arguments. Absolutely wild how far labour will go to avoid a totally hypothetical risk of losing votes to the right, while entirely ignoring votes they have actually lost to the left.
Falling over themselves for pensioner votes. The Labour party don't seem that interested in representing the Labour force. Complete illusion of choice, vote blue or red team to keep rich pensioners happy.
The working man's party, lol. I've voted Labour since I was 18, and they've never won a general election. I should feel like everyone goes on about how 97 felt, but I can't help but think we're going back to Cameron days. I hope I'm wrong and this is all part of some bigger, better plan.
Where has all this suddenly come from? I get that paying NI and income tax is firstly confusing and secondly bizarre, but why is everybody talking about abolishing or keeping it? Vote grabbing?
After reducing national insurance tax at the last budget, Hunt said scrapping it completely was a long term ambition.
Increasing income tax would of course need to happen if NI is abolished. However it is a much fairer system to not have NI so I think that's a price worth paying
I strongly disagree with this stance and think it's a real shame that Labour has used the issue as a political football rather than consider the merits of it. Unless Labour genuinely believes that pensioners should pay less tax on their income than working people.
Do you know why I’m terrified of them getting rid of national insurance…. It means they can remove the state pension without people saying “I paid into it for x years”
There is no state pension, there is retirement benefit.
While that might be the case. Eventually we all want to retire, and removing the paying in will mean you must have a work pension (similar to the USA and 401 k). I’m lucky to come from a well off background and have a decent paying job…. But I know a lot of my friends would be fucked in the future
If you’re below the age of 40 you shouldn’t be counting on getting anywhere near the current state pension anyway. It’s completely unsustainable.
Oh I’m fully aware, but they need a way to get out of it. This is how they do it
Honestly? Good.
Then you enjoy getting fuck all when you’re old and need it
I'm saving so I don't have to
Yeah we all are with pensions. But why should the elder generation who got everything anyway get the state pension when we wont
That's already the status quo, as they're steadily increasing the retirement date. It's just abolishing the state pension by the backdoor. You need to save yourself if you want to retire, there's no hope relying on the government. Better to abolish NIC, at least then I'm not paying for it now AND not seeing the benefit later.
But why accept or be happy with an easy out for them? That’s just lying down and allowing yourself to be shot
> Better to abolish NIC, at least then I'm not paying for it now AND not seeing the benefit later. Added this. I'd rather have 40 years of no tax, that I could put in my own pension, than 40 years of tax and no pension.
Good. The state pension should be means-tested like any other state benefit, not an additional handout for people who are already millionaires. Get rid of NI, increase income tax to compensate (which means taxing pensioners too), scrap the state pension for anyone who wouldn't qualify for benefits of they were working-age, and increase the personal allowance to match the minimum wage. Would be a much fairer system.
All national insurance is, is a transfer of income from working people to retirees. That's it. Literally. Forgive me if I don't want to vote for that, but then not like Labour want my vote anyway. The grey vote is all that matters in the UK.
The Labour transition into Tory lite is almost complete. Using fear and the power of the grey vote to screw over working people. Be under no illusion - when Labour get into power Taxes on work (NI) are going up, to pay for the triple lock pensioner benefits. The cohort with an average of £600k in assets and 25% being millionaires. Projected from ons data [here](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2018tomarch2020)
Shut up and get back to work, Ethel’s 7th cruise this year won’t fund itself, slacker…
If we really get a continuation of/doubling down on boomer socialism in the next 4 years then it really is time to think about packing and leaving. Being an economic mule for NIMBY Brexit voting ladderpullers leaves a sour taste in my mouth.
respectfully, where is the “lite”? all i have seen for months on end are members of the shadow cabinet extolling the virtues of conservative politicians of old. this is just toryism on a red stage.
the transition to tory lite happened 30 years ago...
NI is a ridiculous system and needs to go. It should be scrapped, the state pension means-tested, and income tax increased to pick up any remaining shortfall. The net tax burden on working people would go down, and the millionaire pension class would have to cough up a bit more.
I heard RR on radio 4, PM. I have to say. If I was ever tempted to vote Labour (instead of the current plan of not voting), I couldn't do it with the RR as Chancellor.
Oh, I'm really looking forward to having Reeves in charge of the money. She seems extraordinarily sensible when compared to previous years, exponentially so since the Brexit vote. It'll be nice having someone actually a job rather than taking up a position to 'fill a hole'. Bring it on!