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. 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….

  2. Anon E Mouse

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

  3. 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 […]

  4. James Plunkett

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

  5. 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 […]

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