The Tory tax cut: first impressions

HJ

I think a general cut in employers' NI (which is, after all, just a tax on jobs) is a far more sensible idea. The problem isn't just to get companies to take people on, it's to help them afford not to make current employees redundant.

A general cut also would be simpler and require no new bureaucracy. Cameron's plan would actually encourage companies to lay people off, knowing that they could get an effective subsidy to re-employ them just three months later. It would also require bureaucratic overhead to check that companies were only claiming it for certain new employees and a certain category of new employees (i.e those previously unemployed).

Cutting NI will also make companies that export or compete with imports more competitive relative to their competition - which can only be a good thing considering the appalling trade deficit (which everyone seems to have forgotten about).

Cameron should keep it simple and avoid the complication of Gordon Brown-style 'targetted' schemes, which are usually ineffective, always have unfortunate unintended consequences and have high administrative overheads.

Punk Economist

OK, here's the cunning plan. We make all our staff redundant and pay them off with three months' gross wages, saving employer's NIC and they get a tax-free lump sum. Then we take three months holiday while we wait for the recession to blow over. Then we sell the company to an offshore partnership funded by debt secured against the old company, and we can deduct the interest cost against tax. Then we re-hire the old staff and save ourselves another £2,500 per head. Beats working for a living.

cuffleyburgers

Good move in itself but too timid.

They must nail brown up for his vandlism of the economy, his lies and his hubris. The no more boom and bust is a step in the right direction but they must wade in.

They must keep it in the headlines with a constant stream of news about the crap state of the state, and how it is all the fault of the incumbent governemnt and in particular one g. brown.

Shouldn't be too difficult?

Where the hell is Osborne??

The Populus poll is a crushing indictment of the tories' performance.

TrevorsDen

I just heard Brown on the radio doing the Tories a favour by saying they already had £12 billion of unfunded tax cuts. He seemed to be implying this was bad - and ignoring his own unfunded spending and tax proposals.

The Tory proposals are a help for the unemployed, it positions them as caring and indeed a little daring.

But Tories and LibDems are in Opposition. Cameron's proposals are just that, proposals. They can implement nothing. Brown can spray money around as bribes and hang the consequences. He knows the media are too thick and or too biased to expose him. If it wins him votes then it he will be happy to have another 5 years to sort the mess out - although it would be interesting to see who he blamed it on this time.

Brown will be happy to swan around in the company of other world leaders as they sagely tell their electorate how collectively wonderful they all are - after all they are not all going to line up and say 'its all our fault' are they?

The point? The point is not to pontificate on Tory this or Tory that or Tory the other.

The point is that the bastard responbsible for our own national mess is one Gordon sodding Brown.
Geddit Mr Spectator hacks?
Expose HIM stop worrying about Tory proposals (just support them),Tories can do nothing except present themselves as a responsible alternative.

My guess is that Browns alternative will be his usual cats cradle of means tested credits targeted at his own marginal constituencies paid by stealth taxes on Tory voters living in the south east.

ie your subscribers Mr Spectator hack.

Ricardo

It's an extremely clever scheme. Some thoughts:

£2,500 per year reduction in employers' NIC is actually worth only £1,800 to a company paying mainstream corporation tax (NIC is deductible). It would be slightly more for someone paying smaller company rate but the numbers look like they've been worked out assuming the employer pays 28% tax. So that's a real cash saving of £150 per month. That might cover the additional compliance cost of re-jigging the monthly payroll and keeping track of which staff fall into which category. It would be unfortunate if an employer got mixed up between a "cash-back hire" and a "non-cash-back hire" and got fined for breaking the PAYE rules by the taxman. It's unclear where the employer gets the money to pay the new hire's salary.

Ruairidh

First impressions? Something along the lines of 'so what'. This measure does nothing for me. I can see that there are some benefits on the macro scale if this helps bring down the number of long term unemployed and therefore I would benefit indirectly. But as a right here right now measure for the impending recession it's rubbish.

I'm also sceptical that the tax break would really drive company behaviour in the way it is designed to and I also don't like fiddly little pin point solutions that would require a lot of paperwork to manage.

Sue Denim

Agree with Ruairidh. SFW?

It makes an unwelcome distinction between job applicants who bring the subsidy and those who don't. Most govt subsidues to companies do not attract real businesses, who do what they think is right anyway. Businesses who chase subsidy, who modify their behaviour to get govt money, are not good businesses.

What we need in this country is a chpater eleven-like way to keep companies operating when times are tough. The way we do things is not calculated to preserve viability over arough patch, but to kill the company too soon, with plenty of incentive for various participants to feed off the carcass.

Hereford

Is that it? Is that what all the hype and manoeuvring to get the earliest announcement slot was in aid of? I thought Cameron was going to announce something as eyecatching as the Great Inheritance Tax wheeze.

I have to say, I am not a little dissappointed.

Travis Bickle

Since any scheme the Tories propose will never actually see the light of day then the whole point of the exercise is for them to be saying "something".

Meanwhile Brown gives a lesson in how to restructure debt that makes Ocean Finance look like novices.

Rajesh

This is another example of introducing complexities to the tax codes. Each of these just add additional bureaucracy to companies and also add distortions. What is required is simplicity in the tax code along with tax cuts that will result in accross the board reduction of taxes rather than targeting of tax cuts.

JamesC

If this really did work, why would we just do it for 350,000 people - why not the entire stock of unemployed and IB?

Dr Tchok

I'm a small business. I'm trying to find ways of not making my current employees redundant, not taking people on.

I don't think this is properly thought through.

Paul B

What a let down, what a load of bow locks. Its too complicated , its a bloody Brownite mirage, smoke & mirrors. As the poster about said, do away or reduce employers NI contributions, which is a direct tax on jobs. Why or why do politicians have to try so be so blooming clever.

Whats in it for White man van who employs a couple lads on & off, as demand dictates. I tell you, sweet Football Association, thats what.

UKIP, where are you mate, what will your mob do for the hard working back bone of the country?

Hysteria

Ricardo - good technical analysis
Dr Tchok and Paul B - good political analysis

we're stuffed