National insurance, jobs and the low-paid

I haven’t really had a chance to delve into the depths of the pre-budget report, so I’m just going to briefly touch on one thing I didn’t like and one thing I did.

Until last week, the aspect of Labour’s tax plans that worried me the most was the 0.5% increase in employer’s national insurance contributions. Given the dangers of a jobless recovery, possibly the riskiest form of tax rise is one that discourages employers from taking staff on.

Obviously the equivalent increase in employee NI would also be unpleasant for those of us paying it, but the number of people wanting work is high compared with vacancies, so I think that small tax disincentives to do so won’t really affect job applicants. But taxing employers for hiring people, when they’ve already been stretching their margins by keeping people on during the recession, is risky.

Now that this 0.5% rise has become a 1% rise, I’m twice as worried.

But given this, it’s a good thing that the threshold at which NI kicks in will be raised, so that lower earners will avoid the pain of this rise. (It was also encouraging to hear that the structural deficit and the taxpayer cost of the bank bailouts are both looking to be smaller than feared. But these aren’t policies.)