Who should pay for social care ?

[clivem2]

From what I hear, the 1.25% surcharge will appear as an extra line on your pay slip.

Isn't that from 2023 but before then it's added to NI?

Is it all earnings from £0.01 or does the 1.25% start in 2023 from the NI base...£8k or whatever it is - which is below the income tax threshhold?

From the beeb:
Employees and the self-employed will pay more tax from April 2022.

At first this will be as a 1.25 percentage point increase in National Insurance.

From April 2023 National Insurance will return to its current rate, but a new health and social care tax will be introduced at a rate of 1.25% - making up for the change to National Insurance.

On wage slips it will appear as a "Health and Social Care Levy".

The levy - unlike National Insurance - will also be paid by pensioners who work.

People who earn under £9,564 don't have to pay National Insurance or the new levy.

Employers will pay more National Insurance - and the levy.

Edit: it looks like the 1.25% does get added to the 2% NI in the short-term...the press articles with examples of costs assume this. I still believe that reducing the pain at the low-end and increasing it at the top-end should be the way forward.

 

[Tony L]

I’m still trying to figure out how much the Tories have shat on independent small business with this. The assumption is ‘a lot’ as they have never represented us. I googled up this:

“What if you’re self-employed?

The impact will be even bigger if you are self-employed. Self-employed workers pay either Class 2 or Class 4 for National Insurance, which is less than SMEs and is taxed on income after business expenses.

If you’re a sole trader then, under the new rules, you’ll still lose an additional 1.25 pence for every £1 earned. Given you pay your own salary, a tax on earnings is therefore also a direct reduction of income.”

From a site called Startups.

So, assuming it is correct this is a full 1.5% income tax rise. A 1.5% income tax rise on businesses that so often can’t pay their owners minimum wage, have zero holiday pay, zero sick pay, zero pension rights, zero union rights etc. As ever we are the ones the Tories take a huge steaming shit on (and Labour would be no different/better, they never are).

 

[paulfromcamden]

I've always worked on the assumption that it does owe me a living. So far, so good.

 

[Ponty]

The young workers don't get free university education, don't buy £50k homes that they can sell for £1m, don't get the same final salary pensions, don't get "jobs for life" - whereas much of the older generations did and are no doubt massively benefitting from all of those things. The young workers won't be able to retire at 55, and they're paying almost double the rate of NI that someone did 40 years ago, whilst trying to hold down jobs in Amazon and McDonalds and living with their parents. What an absolute tragedy it is that this older generation have, on the whole, spectacularly failed at making the world a better place for their children to live in; unlike the generation before them, who fought and died to make the world a better place for their own children.

Agree with much of this and it’s down to our generations not willing to accept consequences for failure. A key reason for the situation we now find ourselves in is continued govt intervention to prevent any meaningful economic correction for circa 30 years. Any sign of trouble and govts / central banks have simply flooded everywhere with money they don’t have. All to keep asset prices sky high at any cost, as this is what drives consumer confidence, spending and wins votes. They are not allowing economic cycles to run their course. ZIRP, QE and forbearance are a complete disaster for the next generations and why so many young people cannot buy a home. In essence, we’ve been bailed out rather than face the music for too much debt and unsustainable lifestyles and the next generations are paying the price for our fantasy economics. Think about this, 40% of all US dollars in existence were printed in the last 12 months. In the UK, QE now represents 40% of GDP with govt debt at 106% of GDP. Financial recklessness beyond belief. History will not judge us well.

 

[Kirk]

I wonder what they think of 10%, then? Since that's what has happened.

12% to 13.25% = 10.4% rise.

In a focus group that might have swayed a few but out there the people will only hear 1.25%. The public also shrugged it shoulders at spending 37bn squid on our world-beating Test and Trace program.

 

[Ponty]

I’m still trying to figure out how much the Tories have shat on independent small business with this. The assumption is ‘a lot’ as they have never represented us. I googled up this:

“What if you’re self-employed?

The impact will be even bigger if you are self-employed. Self-employed workers pay either Class 2 or Class 4 for National Insurance, which is less than SMEs and is taxed on income after business expenses.

If you’re a sole trader then, under the new rules, you’ll still lose an additional 1.25 pence for every £1 earned. Given you pay your own salary, a tax on earnings is therefore also a direct reduction of income.”

From a site called Startups.

So, assuming it is correct this is a full 1.5% income tax rise. A 1.5% income tax rise on businesses that so often can’t pay their owners minimum wage, have zero holiday pay, zero sick pay, zero pension rights, zero union rights etc. As ever we are the ones the Tories take a huge steaming shit on (and Labour would be no different/better, they never are).

It’s staggering Tony. I commented on another thread that the risk reward equation doesn’t really stack up now for people who run their own business. Just go and work PAYE with all the benefits and none of the risk or hassle. I never thought I’d be saying that under a Tory govt.

 

[paulfromcamden]

It’s staggering Tony. I commented on another thread that the risk reward equation doesn’t really stack up now for people who run their own business. Just go and work PAYE with all the benefits and none of the risk or hassle. I never thought I’d be saying that under a Tory govt.

Is there anyone in the cabinet with any experience of running their own business?

The get rich quick pyramid scheme run by Michael Green/Corinne Stockheath/Sebastian Fox doesn't count.

 

[Tony L]

I never thought I’d be saying that under a Tory govt.

Aside from a small bubble with Thatcher’s ‘Enterprise Allowance Scheme’ (which I suspect was actually just a tool to hide truly horrific mass unemployment figures) the Tories have consistently hated small business. They are only interested in business if it is large enough to offer backhanders, fake directorships, party donations etc. Any business below that is just another form of proletariat to be milked until it fails. They have always been class-warriors and nothing ever changes.

Labour are no more use as they can’t see beyond the unionised mass-labour of the 19th and 20th century. They have never had any concept of independent thought or that those that do may need some help now and again. Neither party are even remotely small business-friendly IMO. To be honest it is another reason I have historically been more inclined to vote Lib Dem as they exist outside the endless landed gentry vs. lumpen proletariat battles of the two-headed dinosaur and actually grasp independent small business exists. As an example raising the threshold where income tax starts rather than cutting rates at the top is probably the most significant tax change I’ve seen in my life, and the LDs forced that one through. That one actually helped.

This rise, if I understand it correctly, means this bunch of grasping corrupt trough-feeding parasitic shitheads have found a way to charge the (often very low-income) self-employed an extra 1.5% tax on all their income, i.e. including that below the point income tax even starts.

 

[Ponty]

Aside from a small bubble with Thatcher’s ‘Enterprise Allowance Scheme’ (which I suspect was actually just a tool to hide truly horrific mass unemployment figures) the Tories have consistently hated small business. They are only interested in business if it is large enough to offer backhanders, fake directorships, party donations etc. Any business below that is just another form of proletariat to be milked until it fails. They have always been class-warriors and nothing ever changes.

Labour are no more use as they can’t see beyond the unionised mass-labour of the 19th and 20th century. They have never had any concept of independent thought or that those that do may need some help now and again. Neither party are even remotely small business-friendly IMO. To be honest it is another reason I have historically been more inclined to vote Lib Dem as they exist outside the endless landed gentry vs. lumpen proletariat battles of the two-headed dinosaur and actually grasp independent small business exists. As an example raising the threshold where income tax starts rather than cutting rates at the top is probably the most significant tax change I’ve seen in my life, and the LDs forced that one through. That one actually helped.

This rise, if I understand it correctly, means this bunch of grasping corrupt trough-feeding parasitic shitheads have found a way to charge the (often very low-income) self-employed an extra 1.5% tax on all their income, i.e. including that below the point income tax even starts.

The raising of income tax threshold was an excellent policy and all credit to the Lib Dems for that one. It’s such a blindingly obvious way to help those on lower incomes and encourage those who are not into work. NI is a scam. Just call it tax, as that’s exactly what it is.

 

[Markyb]

And they will still vote for the immoral evil honey monster

 

[laughingboy]

Agree with much of this and it’s down to our generations not willing to accept consequences for failure. A key reason for the situation we now find ourselves in is continued govt intervention to prevent any meaningful economic correction for circa 30 years. Any sign of trouble and govts / central banks have simply flooded everywhere with money they don’t have. All to keep asset prices sky high at any cost, as this is what drives consumer confidence, spending and wins votes. They are not allowing economic cycles to run their course. ZIRP, QE and forbearance are a complete disaster for the next generations and why so many young people cannot buy a home. In essence, we’ve been bailed out rather than face the music for too much debt and unsustainable lifestyles and the next generations are paying the price for our fantasy economics. Think about this, 40% of all US dollars in existence were printed in the last 12 months. In the UK, QE now represents 40% of GDP with govt debt at 106% of GDP. Financial recklessness beyond belief. History will not judge us well.

The problem with the government intervention is not its size or 'recklessness', it's the fact that it is directed at the financial sector and the already asset-rich. The distributional aspects of this are unforgivable: life gets harder for the broad mass of people.

In the UK, QE has gone from £445bn in Feb 2020 to £895bn today (Bank of England). For whose benefit?

 

[Ponty]

The problem with the government intervention is not its size or 'recklessness', it's the fact that it is directed at the financial sector and the already asset-rich. The distributional aspects of this are unforgivable: life gets harder for the broad mass of people.

In the UK, QE has gone from £445bn in Feb 2020 to £895bn today (Bank of England). For whose benefit?

As I said, it’s all about keeping assets inflated. That’s what keeps people voting for them.

 

[laughingboy]

As I said, it’s all about keeping assets inflated. That’s what keeps people voting for them.

Yes, but after QE, the debt stays on the government books even though the Bank of England's Asset Purchase facility has bought back the bonds.

The Bank of England is wholly owned by the UK government. So the government is counting the IOUs in one pocket of its trousers - its debt - while ignoring the fact that £895bn of them could be settled by the assets in its other pocket. It is, as you say, fantasy economics.

Which is one reason why, while I agree with most of your argument, concern about £2.2bn of national debt is, in my view, misplaced.

https://www.ons.gov.uk/economy/gove...nmentdebtanddeficitforeurostatmaast/march2021

 

[Ponty]

Yes, but after QE, the debt stays on the government books even though the Bank of England's Asset Purchase facility has bought back the bonds.

The Bank of England is wholly owned by the UK government. So the government is counting the IOUs in one pocket of its trousers - its debt - while ignoring the fact that £895bn of them could be settled by the assets in its other pocket. It is, as you say, fantasy economics.

Which is one reason why, while I agree with most of your argument, concern about £2.2bn of national debt is, in my view, misplaced.

https://www.ons.gov.uk/economy/gove...nmentdebtanddeficitforeurostatmaast/march2021

My concern over the debt level is when IR’s rise. The govt is in the same boat as many mortgage holders and companies. Serviceable at ‘emergency’ IR’s, horrifying once IR’s return to any kind of medium to long term average.

 

[laughingboy]

Fortunately, the government is not in the same boat as mortgage holders and companies at all. Most UK bonds ('gilts', see here) are issued with a rate of interest that is fixed at the time of issuance, the so called 'coupon' rate. I think I am right that the highest coupon being paid on gilts is 6%. Most are 1.5% or thereabouts (see here). There are some index-linked gilts (see here), but the overwhelming majority of gilts are fixed-rate. So, for the most part, unlike mortgage holders, the government doesn't need to worry about variable rates.

In fact, it could be said that the government is not in a boat at all. The UK government, to ludicrously extend the metaphor, is more like the sea. It has control of its own currency, and can alter banking regulations, fiscal and monetary policy, etc if it needs to. QE is a good example of this. The government, via the BoE, effectively creates from thin air the money to buy back bonds. I don't know any mortgage holders or companies that can do that.

 

[Ponty]

Fortunately, the government is not in the same boat as mortgage holders and companies at all. Most UK bonds ('gilts', see here) are issued with a rate of interest that is fixed at the time of issuance, the so called 'coupon' rate. I think I am right that the highest coupon being paid on gilts is 6%. Most are 1.5% or thereabouts (see here). There are some index-linked gilts (see here), but the overwhelming majority of gilts are fixed-rate. So, for the most part, unlike mortgage holders, the government doesn't need to worry about variable rates.

In fact, it could be said that the government is not in a boat at all. The UK government, to ludicrously extend the metaphor, is more like the sea. It has control of its own currency, and can alter banking regulations, fiscal and monetary policy, etc if it needs to. QE is a good example of this. The government, via the BoE, effectively creates from thin air the money to buy back bonds. I don't know any mortgage holders or companies that can do that.

You think coupon rates will stay this low forever? As as result of govt interventions such as QE, inflation is going through the roof. We all know what happens next.

 

[matthewr]

I've not seen the fine detail on the 1.25% extra NI. I'm assuming this doesn't get applied to the 2% flat rate NI above about £50k earnings - maybe I'm mistaken. Increasing the high earner flat rate and possibly pushing the current max rate higher than £50k could have been used to reduce the impact on low earners.

For clarity it's not 1.25%, it's 1.25 percentage points which is a 10% increase in NI for those who pat NI on all their income (i.e. poor people).

 

[laughingboy]

You think coupon rates will stay this low forever? As as result of govt interventions such as QE, inflation is going through the roof. We all know what happens next.

I'm not sure what will happen to rates, except that bond and inflation rates are historically low, so are likely to rise. Would inflation of 6%pa be 'through the roof'? If wages were able to rise in line with price inflation, I'd welcome 6% inflation. It would help rebalance the economy in favour of people with mortgages, by eroding the relative value of their debts.

But no, I don't have a scooby about what will happen next. Who does?

EDIT: On second thoughts, 6% inflation and attendant interest rate rises might cause a wave of mortgage defaults, which might crash the banks (unless they all become landlords). We really are in a bad place, where the simplest remedies might have terrible side-effects.

 

[matthewr]

The mistake here is not to raise taxes to pay for social care but to raise it via NI which is regressive. In fact it's such a patently unfair choice I have no idea why they are not getting hammered on this point.

There was a mind boggling exchange between Laura K. and Johnson yesterday where LK said something like "Choosing to raise this via NI means not everyone will pay for it" to which Johnson replied "Yes but everyone will benefit!".

If he had posted that here I would have been obliged to reply with the Jean-Luc Picard facepalm ascii art.

 

[Ponty]

As I said at the beginning of this thread, they’ve whacked it on NI so they can keep the headline income tax rates palatable.