Rumoured jobs tax would make this government the highest-taxing in five decades

March 16, 2018 11:41 AM

Responding to yet more rumours of a hypothecated 'NHS tax' by increasing national insurance, Alex Wild, Research Director at the TaxPayers' Alliance, said:

“For all the government’s spin about cutting taxes, they’ve quietly been ramping them up to levels that Gordon Brown could only dream of. It’s no wonder growth is so weak when work and investment are punished so heavily by the taxman.

"Earmarking taxes for specific budgets is either smoke and mirrors or dreadful policy depending on how it’s done. A proportion of national insurance contributions are already allocated to the NHS and the government knows full well that this makes absolutely no difference to the size of the NHS budget. It may as well allocate a percentage of fuel duty to the police.

"If the earmarking was more rigid, the NHS budget would be hostage to receipts from a single stream of tax revenue which is more volatile than the overall tax take. This will either leave the health service with less than it budgeted for, or with a surplus of cash that could be better spent elsewhere on things like defence or education.

"A few years ago the Conservatives argued that a jobs tax would increase unemployment and depress wages. Unfortunately they seem to have forgotten this most basic truth."

 
  • Increasing employees' or employer's national insurance would increase the tax burden to 34.5 per cent of GDP.
  • Philip Hammond is set to become the highest taxing chancellor since Roy Jenkins in 1969-70.
  • If in post until 2021, Hammond will have presided over Britain’s second, third and fourth highest tax years in seven decades.

The Conservatives used to be against national insurance increases, labeling them a 'jobs tax'. In 2010, then shadow chancellor George Osborne said:

"Labour have confirmed today that they are going ahead with a national insurance tax rise on jobs that Britain's business leaders say will endanger jobs. Labour's jobs tax and debt will stamp out the green shoots and kill the recovery. Conservative plans to cut wasteful government spending and stop the jobs tax will get Britain working."

Sources:
OBR: Public finances databank
HMRC: Direct effects of illustrative tax changes
 
Year National accounts taxes (£bn) Yield of 1 point increase in employee NICs (£bn) Yield of 1 point increase in employer NICs (£bn) Tax burden with 1p employee increase (% GDP) Tax burden with 1p employer increase (% GDP)
2018-19 724.9 +4.1 +5.6 34.45% 34.52%
2019-20 746.2 +4.2 +5.7 34.47% 34.54%
2020-21 768.1 +4.3 +5.9 34.46% 34.53%

 
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Media contacts

James Price
Campaign Manager, TaxPayers' Alliance
james.price@taxpayersalliance.com
24-hour media hotline: 07795 084 113 (no texts)

Notes to editors

1. Founded in 2004 by Matthew Elliott and Andrew Allum, and now with 80,000 supporters, the TaxPayers’ Alliance (TPA) fights to reform taxes, reduce spending and protect taxpayers. Find out more about the TaxPayers' Alliance at www.taxpayersalliance.com
2. The TaxPayers' Alliance's advisory council can be found at http://www.taxpayersalliance.com/advisory_council 
3. To read more on why a hypothecated 'NHS tax' would be so damaging, read Alex Wild's op-ed here: https://capx.co/heres-why-an-nhs-tax-is-a-horrible-idea/