Tory National Insurance cut is regressive

The IFS have reported on the three parties' tax and spend plans. They shows that the Tory's cut to National Insurance is regressive.

Beyond the headlines, the Institute for Fiscal Studies’ report on tax and spend shows that the Conservative’s flagship policy to cut the planned rise in National Insurance is regressive and would benefit individuals further up the income distribution.

The IFS’ analysis of the parties’ tax and benefits plan shows that, relative to the Labour and Liberal Democrats’ policies, the National Insurance cut would benefit those towards the top of the income scale to a greater degree than those at the bottom.

The IFS says that Labour’s planned tax increases are “progressive” with the “richest households, especially top 1%, face biggest increase in tax as a proportion of income … [and] lower and middle income households hit but to a much lesser extent”. The Conservative plans are described as “less” progressive.

The report details the pain of spending cuts to come and says:

“Over the four years starting in April 2011, both Labour and the Liberal Democrats would need to deliver the deepest sustained cut to spending on public services since the four years from April 1976 to March 1980. Starting this year, the Conservative plans imply cuts to spending on public services that have not been delivered over any five-year period since the Second World War.”

Other highlights include:

• Estimates that Labour will have to find £50.8 billion to £52.4 billion in spending cuts; the Lib Dems £46.5 billion; and the Conservatives will have to deliver £63.7 billion.

• The Conservatives will “probably” have to reverse half the National Insurance cut they plan.

• 11.6 million married people will be excluded from Tory marriage tax break because husband and wife both work, as reported on Next Left

• The Conservatives’ manifesto is “incomplete at best and misleading at worst” on the issue of tax credit cuts.

22 Responses to “Tory National Insurance cut is regressive”

  1. House Of Twits

    RT @leftfootfwd Tory National Insurance cut is regressive http://bit.ly/bdAxM7

  2. Paula Thomas

    No surprises here RT @StopTheRight: RT @leftfootfwd Tory National Insurance cut is regressive http://bit.ly/bdAxM7

  3. Andy Sutherland

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  5. infodiligo

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  6. Ben Cooper

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  7. Tom Scott

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  8. StopTheRight

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  9. Andy Buckley

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  11. Tory National Insurance cut is regressive | Left Foot Forward « blog01 – new life.

    […] Tory National Insurance cut is regressive | Left Foot Forward Tagged as: have-reported, ifs, national, reported-on-the, spend-plans-, tax-and, the-three, three, […]

  12. Eric Galuppo

    Tory National Insurance cut is regressive | Left Foot Forward http://bit.ly/coZobL

  13. Politics Summary: Wednesday, April 28th | Left Foot Forward

    […] 87 per cent, the Tories another 82 per cent, and the Lib Dems looking for a further 74 per cent. Left Foot Forward looked yesterday at the distributional impact of some of the tax policies that have already been […]

  14. Anon E Mouse

    Will – I thought you had a financial based education?

    1. How can a tax on jobs help workers of his country?
    2. Why have 110 thousand business owners, including Digby Jones, Gordon Browns business minister, said this will be a disaster for workers and jobs?
    3. Didn’t Labour say they wouldn’t raise the top rate of tax in every manifesto since 1997?

    Do Labour ministers not have one have a single positive thing to say about the Labour Party Will?

    Stop being reactive about the Tories all the time – it just demonstrates weakness and there is a danger that idiot Nick Clegg may hold the balance of power in this country in eight days time…

  15. Will Straw

    Hi Anon.

    1. The distributional analysis looks at who benefits as the Tories bring the planned rise in National Insurance down from 1% to 0.5%. The IFS analysis clearly shows that those towards the top of the income distribution to better than others.

    2. Business leaders oppose tax shocker. You’ll be telling me that the unions oppose public sector cuts, next. I presume you haven’t seen the article in today’s Guardian showing that the business leaders who backed the Tories ignored their own accounts in rushing to their judgments.

    3. They did and they broke their manifesto promise. I’m glad they did since the scale of the recession was unanticipated in 2005 and I would rather those earning over £150k made up some of the difference rather than rising the base rate of income tax was raised.

    4. I agree that the whole campaign has been more negative than positive but the media has largely ignored Labour’s positive agenda including the launch of their health, defence, and environment manifestos among others. We covered the latter but there’s only 2 of us working full time and, in our judgment, exposing the risks of a Tory government is a higher priority. Plus we don’t agree with everything that Labour is proposing eg Trident renewal.

    All the best,

    Will

  16. Anon E Mouse

    Will – I’m pretty swamped at work at the moment – building engineering prototypes which mean more production in Britain for the companies we work for. The recession (finally) does feel to be ending – certainly our output is up which means increased work for our customers but to advocate increasing tax at this point is nuts. I actually work in the real world Will so it’s not some theoretical discussion to me, it’s real.

    Yes of course business leaders will oppose higher taxes – everyone should – but to hit companies such as ours (two director/employees) is just unfair – and we did approach our bank and were refused an increase in our overdraft to cover the recession.

    We are doing 20 hour days because we can’t afford to take an employee on (in fairness it’s not just the NI) – at present we would pay 12% on the employer contribution – if that goes up by 1 penny it is an increase of 8% to us (from 12 to 13 %) – and that doesn’t include the employee’s contribution.

    So you can swear black is white all you like Young Will but to me the NI increase is a tax on jobs period.

    You know it. I know it. Everyone knows it – it stinks and we will have to disagree here I’m afraid….

  17. Anon E Mouse

    Will – You’re wrong on Trident as well dude!

  18. Look Left – The Week in Fast Forward | Left Foot Forward

    […] the headlines the IFS revealed that the Conservative party’s flagship policy to cut the planned rise in National Insurance is […]

  19. James Plunkett

    Who do the Tory tax plans benefit? – http://bit.ly/bdAxM7 That's a surprise! via @leftfootfwd

  20. Tory Stories » Blog Archive » What the Tories say – and what they really mean

    […] Conservatives win tomorrow they will have to resort to a VAT rise to fund the NI cut – lowering a progressive tax by increasing a highly regressive one; in relative terms, taking from the poor and giving to […]

  21. Amanda

    @traineeGG it has been regressive, yes, needed rethinking but this will disproportionally benefit the better off http://bit.ly/9zHVTe

  22. The alternative to "Osborne's bombshell" | Left Foot Forward

    […] a regressive move to cut to the planned increase in employer National Insurance – dubbed Labour’s […]

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