From the TUC

What happened to the National Insurance holiday?

24 Mar 2011, by in Labour market

No news yesterday on the last ‘pro-growth’ measure that the Chancellor announced in his June Budget: a national insurance holiday for business start ups. As Richard wrote at the time, evidence from the past suggested that it’s impacts would be minimal and in February we learnt that take up was extremely low. Yesterday, despite calls for the scheme to be extended, no more news was available on its progress.

At a projected cost of around £320 million a year the funding allocated to this initiative is significant – it is, for example, 16 times more than the Chancellor saw fit to spend on young unemployed people yesterday. But it seems that it isn’t working – and that it may well prove to be a telling example of the limited impacts that such micro measures, even with relatively high levels of funds, can have in the face of severe spending cuts and depressed demand.

One Response to What happened to the National Insurance holiday?

  1. linda kaucher
    Mar 28th 2011, 10:25 am

    The NI holiday is strong and working very well for the Intracorporate Transferee system.

    This is workers brought into the country by transnationals corps on lower end wages, in fact below minimum wage, with the difference made up in tax free expenses.

    When workers are brought in for less than a year, there is no NI paid – employer or employee.

    Combined with the lower end wage and the tax exempt aspect of, effectively 75% of the wage, bringing in overseas labour is structually advantaged compared to hiring here.

    And there is a very big loss to govt coffers – in this loss of tax and NI, but also in the increased welfare bill as UK workers are not hired or displaced. The earn/spend cycle is broken, as wages are sent out of the country. And the UK skills base is being lost at a fast rate.

    For all these reasons, the TUC needs some more sophisticated analysis, beyond ‘support the Labour Party’, and to take respectful responsibility to provide real information to workers.