Tories create clear blue water over taxing issues

SHADOW chancellor George Osborne's pledge to block some of next year's planned National Insurance rises further differentiates the party's fiscal address from that of Labour. His proposal would benefit anyone earning up to £45,400, with the new rate applying to higher earners. Welcome though this is, it does not address the fundamental problems with NI: the fiction it maintains of a National Insurance "pot" into which contributions are paid and the complexity it brings to th

Business has long called for simplification, preferably by merging income tax and National Insurance. The complexity of the current regime is a major barrier for companies to attracting talent. Firms would be more likely to employ extra staff if taxes were reduced or reformed.

On average, it takes five individuals in each company five days a month administering employment tax schemes. A single personal income tax would remove the need for different allowances, rate bands and filing dates. The objection is that this would do away with the contributory principle on which the concept of National Insurance rests.

But this could be better dealt with by a general rise in tax, with employer contributions subsumed into corporation tax.

The current system is particularly iniquitous for being a specific tax on employment – the last impost that a government committed to protecting a fragile recovery should surely be planning to increase.