Cost of NI cut

While attention has, rightly, focused on the adverse effect on jobs of Labour's proposed 1 per cent hike in National Insurance contributions for both employers and employees (your report, 2 April), opposition parties seem to have overlooked the fact that its introduction also represents a 1 per cent spending cut over the whole public sector.

The trick is that, although the level of expenditure apparently remains unaltered, every health trust, local authority and university, etc, will have to meet the NIC increase by paying a total of 1 per cent of their paybill to the UK exchequer. That means there is less for Labour's cherished public services at the so-called "front-line" and elsewhere. And there is 1 per cent less in the pay packets of their equally cherished public servants.

An identical situation arose when NIC was similarly increased in 2003. In the first couple of years, there would be no respite for public bodies. However, eventually, driven by the notion that NIC was an acceptable part of running costs, there would be a manoeuvring of the money to enable the loss to creep back in, albeit at the cost of the private sector, from where its resources emerge.

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My bet is that Labour will soon drop the policy. So the remonstrations by the much-maligned company bosses would have had the effect of stopping a cut in public spending, as well as calling a halt to the rise in their own running costs, and leaving more money in the hands of the hard-working, ordinary families, whether in the public sector or not, to whom Labour is so devoted.


Thomson Crescent