The Government’s decision to increase national insurance contributions for the self-employed is probably one of the worst budget measures in recent times. Not only has the Government broken it’s 2015 election pledge to not increase national insurance contributions for 5 years, but the measure represents a tax on aspiration and wealth creation, and is completely unfair.
In breaking its 2015 election pledge not to increase national insurance, the Conservative Party have lost all credibility. No longer can any future election manifesto promises it makes be trusted, and the consequential damage to its credibility will be the lasting long term legacy of what was a disastrous u-turn and breach of trust. Reputation matters, and when somebody says “my word is my bond” and people believe them, then that is a priceless asset to have. It makes the job of selling a manifesto to the public, for example, so much easier. Trust and faith matters is politics. When you make a promise therefore, it is absolutely essential that you keep it. In the 2017 Budget, the Conservative Party frivolously threw that all away with its national insurance increase. From here on in, their ‘word’, their promises, will be regarded as completely meaningless with zero credibility. Their ‘word’ has now essentially attained junk status.
Moreover, the policy itself to increase national insurance contributions on the self-employed is completely misguided. The self-employed, unlike employees, do not receive holiday pay, sick pay, parental leave pay, and do not receive the benefit of having an employer paying into their workplace pension. It is only right, therefore, that the self-employed pay substantially less in national insurance contributions, as it is the employed who benefit most from the money raised by those contributions. Furthermore, it is the self-employed who are one of the main wealth creators and principal engines of growth within the economy. Individuals take enormous risks when starting up a new business. It is a leap of faith, and a venture into the unknown. But, when a new business succeeds, especially in a new area of the economy (e.g. a technological breakthrough, a new innovation, etc), then that business can often grow very quickly, creating new jobs and other benefits for the economy in the process. Why then are the Government placing a further tax on aspiration? It is completely ludicrous and the higher the taxes, the less likely entrepreneur’s are to set up in this country. Instead, they will either not set up at all or will be driven abroad where taxes are less. With the fallout from Brexit, this country needs self-employed wealth creators like never before. The Government should be encouraging them by providing them with new sources of investment and tax breaks, instead of burdening them with new taxes on aspiration.
It should be noted, however, that the national insurance increase is not the only own goal this Government is guilty of in terms of the future of the economy. Why, afterall, has this country not got an equivalent to Silicon Valley with its mix of numerous high tech start ups and the core of established companies like Apple, Facebook, Google, and Microsoft? Quite simply, because as soon as any British high tech company becomes successful, it gets swallowed up by a foreign rival due to this country’s overly lax takeover rules. Look at what happened to Britain’s largest high tech company, the microchip designer, ARM Holdings PLC, last September. The Government simply allowed it to be taken over by a Japanese company, SoftBank Group Corp, without any proper assessment of the wider impact on the British economy. This country will never be able to properly establish a high tech base to rival that of other countries when this kind of nonsense is allowed to occur. What this demonstrates is that this country lacks a proper industrial strategy, and a key component in any industrial strategy is a national interest test in relation to foreign takeovers. This would allow the Government to step in to protect a vital sector of the economy when threatened with a foreign takeover. Indeed, what all this highlights is that this Government, with Brexit pending, lacks any kind of vision for the future of the British economy and how it will survive Brexit, and the new taxes on aspiration and the lack of any industrial strategy are 2 symptoms of that failure. Quite simply, this Government is completely unprepared for Brexit.