Consequences of Increasing Employers' NIC

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Transcript

Hello, welcome to this Mercia podcast and yes, we're starting the run up to the spring forecast and the end of one tax year and the beginning of another and we have been told that the spring forecast, not the spring statement interestingly, it's changed its name again, but the spring forecast would not contain tax policy announcements. 

Now, I am getting old and I am getting cynical and lots of things do agitate me, I have to say. But we have heard this before from previous governments that statements would be purely fiscal statements and not tax statements. And then of course, guess what? Circumstances, dear boy, circumstances. And you do wonder in terms of You know, particularly the employer's N. I. changes, not just the 15%. You know, we, it's interesting that we have encountered some of this before with social care levy, and it didn't create the same outcry from businesses. Social care levy was an increase in the rate of national insurance for employers and employees, of course, but it didn't create the same out outcry. 

And I think some of that is because okay, 15 percent is not clever compared to 13. 8. But I think more importantly, the reduction in the threshold at which employers pay, you know, that's another 600 quid per head for most employees before you start with anything else. And as we all know in business if your overheads suddenly jump like that, A, businesses will already be making decisions. 

And I think that's been quite clear since the budget that, that actually businesses are making decisions in, before the changes actually take an effect. And as a somebody who's been involved in running businesses as somebody who's very close to, you know, clients as you are, as we all know, if your overheads go up suddenly like that and cause a shock to the system, there are limited ways you as a business, can cater for that. 

One is try and pass those costs on if you can. Interestingly I know particularly in the building sector, suppliers, contractors have been called in by building companies and said, don't even try to pass it on to us. If you do pass it on, I would suggest that's called inflation. And of course we're starting, we've just seen sort of at the end of February inflation starting to go up again. 

If you can't pass it on, then what are your options? The business makes less profit which is not good if you're quoted, clearly. There'll be pressure from shareholders. Not good if you're an owner manager for slightly different reasons. It means lay somebody off. It means don't recruit new people. 

It means less pay rise for the people that are there. You know, you have limited options. Although it would be political egg on the face, I have to say that it would be far better to knock this policy on the head now than suffer the consequences because we're already starting to see the economy, businesses suffering those consequences, there will clearly be repercussions. 

And, you know, I almost said the law of unintended consequences, but is it unintended? You know, surely somebody must have realised the consequences of whacking up employers. And I, you know, particularly having told businesses for the last two, three years that, you know, we're a friend of business. We want growth. 

Well, I'm afraid what is being done is not a growth plan. But anyway, on that happy note, it will all become clear in the spring forecast. Please feel free to subscribe, stroke order our spring forecast. Obviously, all of this stuff will feed into the tax cards as well. And you wouldn't believe how many hours I spend checking our tax cards. 

It's one of those things where, I think if nothing else now, it is one of those things that you can physically give to clients. And they keep it in their wallet, and it's got your logo on. And they appreciate it, you know, probably more than any other product that's around nowadays in a tax sense. 

Anyway, yes, those are available. They will contain all the latest information, whether that is what we were told in the budget, or in fact there may be changes in the spring forecast. Take care everybody, and don't panic.