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Mar
2017
Saturday 11th
posted by Morning Star in Editorial

RECKLESS election pledges not to raise direct taxation, a huge budget deficit, national debt above 80 per cent of GDP and rising, members of his own party in revolt over his public spending plans … we could be talking equally about Chancellor Philip Hammond or US President Donald Trump.

Both are victims of demagogy. In Hammond’s case, it’s the demagogy of former prime minister David Cameron and ex-chancellor George Osborne. In Trump’s case, it’s his own.

According to expert lip-readers, talking to defence secretary Michael Fallon on Thursday, Cameron said of Hammond’s budget decision to raise Class four national insurance contributions (NIC): “Breaking the manifesto promise, how stupid can you get?”

The answer, Cameron, is not quite as stupid as you and your then chancellor were during the 2015 general election campaign when promising in countless speeches never to increase NIC and then putting this vote-catching demagogy in writing in the Tory manifesto.

Indeed, pledges not to raise national insurance, income tax, VAT and fuel duty were made four times over in that rather far-fetched work of fiction.

HIH

The current Chancellor had a case when pointing out that new and recent budget proposals mean that Class four NIC payers will now qualify for the same pensions and benefits as everyone else, so asking them to contribute on the same basis is not wholly unreasonable. Abolishing Class two arrangements will actually leave many of them better off.

But some of the lower earners in Class four will still be hit hard, even if the pain is now going to be delayed in line with Prime Minister Theresa May’s semi-U turn yesterday.

At the root of this problem is the basis of the NIC system itself. Although employee contributions are linked to earnings, this is at a single flat rate for all but the highest paid who pay marginally more. For most of the time since the system was introduced in 1948, there have been fewer NIC bands than those for income tax. The result is that NICs have been far less progressive — not tied so closely to the ability to pay — than income tax contributions.

Like income tax, however, the system has been made more complex by other determinants of liability relating to earnings thresholds, accrual points, age and employment status.

Levying NICs on employers for most of their employees also amounts to a poll tax on jobs.

HIH

The latest shambles occasioned by Hammond’s first Budget strengthens the case for reforming the contributions aspect of the national insurance system altogether. But this should be done in order to make it more progressive rather than less, with employers and workers contributing much more closely in accordance with levels of pay and profits.

It would be as stupid to entrust a Tory government with this as it would be to believe anything written in a Tory election manifesto.

As for President Trump, the neoliberal hawks in the Republican Party are screeching about a likely rise in the US federal deficit should his promised infrastructure programme go ahead on the scale planned.

Naturally, they are enthusiastic about his pledge to increase US military spending by $54bn, almost 10 per cent above the current level. But they don’t place the same priority on job creation and intend to keep Trump to his husting pledge to cut taxes.

Something will have to give. Millions of Trump voters may soon realise that his manifesto was as bogus as a Tory one on the other side of the Atlantic.




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