National insurance rate rise will hit the UK economy
While attempting to gloss over any negative factors in the pre-budget report, Chancellor Alistair Darling was forced to confirm that the government will be increasing national insurance by 0.5% from April 2011 for those earning more than £20,000 a year. The move has been criticised by industry leaders as a backdoor income tax and a tax on the recovery of the UK economy.
Back of an envelope calculations suggest that in the region of £5 billion in extra revenue will flow to the Treasury as a result of the increase in national insurance contributions and while there appears to be a £20,000 a year exemption it is not quite sure how this will work. Initial comments from the accountancy industry suggest that after all of the adjustments in the tax situation of the UK worker some employees may well end up paying more in tax by 2010/11.
George Osborne, the shadow Chancellor of the Exchequer, made a robust attack on the Chancellor in the House of Commons suggesting that Labour had reverted back to type with a buy now pay later budget. While this has been refuted by the government there appears to be a ring of truth to the situation.
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