ALEX BRUMMER: Far from causing more inflation, scrapping the National Insurance surcharge could lower price levels – raising the hike is right
Raising the Rise: Conservative Management Favorite Liz Truss
Long before Tory management favorite Liz Truss became a fan of ‘raising National Insurance’, it was clear there were all sorts of problems with this hastily created tax. .
The 1.25% NHS and social care tax on employers and employees has been touted as a solution to the UK’s entrenched welfare problems.
Yet much of the money has disappeared into the black hole of the healthcare system without any formal plan for how the money will be spent.
Before then-Chancellor Rishi Sunak changed the levy for the lowest-paid workers in his spring declaration, in a bid to help the lowest-paid, he was to raise £16billion over the course of of his first year.
Truss’ plan to cancel the surtax has been criticized as inflationary due to its impact on borrowing.
This would be the case if the Bank of England chose to accommodate the additional borrowing through quantitative easing (QE) – the money printing.
But the Bank announced last week that it would start reversing QE, by reducing its bond portfolio, from September as it prepares to withdraw the punch bowl. Far from causing further inflation, the removal of the NIC surcharge could actually reduce price levels. As it is also levied on employers, it represents an additional cost for businesses. At a time when inputs and prices are rising anyway, this provides an excuse to pass on expenses or even expand margins.
As the UK heads into a slowdown or even a recession, it’s also a tax on jobs.
If this causes companies to stop hiring or lay off workers, it could contribute to higher unemployment. This will increase the pressure on public finances as social benefits increase.
Truss will have to do more to help low-income people as another energy price cap hike is set for January. How easily critics forget that the government has already spent £37billion on the problem, including £15billion for those at the bottom of the income scale.
While one admires Gordon Brown’s passion for the cause of the needy, recalling the Commons at this point would only add to the pollution in the skies.
The major audit firms have again been found wanting. PwC failed to show sufficient rigor in challenging BT over the way the £530m fraud at the group’s Italian subsidiary was handled.
PwC was slapped on the knuckles and fined £2.5million by the Financial Reporting Council.
Auditors face constant conflict in their work and too often fall on the wrong side. Too often, audit partners are reluctant to bother directors since executives are primarily responsible for paying fees, even if they are nominally approved at annual meetings.
Conflicts are even more entrenched when auditors also provide consulting services. That’s why EY’s decision to separate its consulting arm is significant, despite the shadow of a big cattery over how it’s done.
Another problem is that the sentence never really matches the offense. That could change if a government in limbo finally legislates for a new, more powerful auditing, reporting and governance authority.
The gap between the fines issued, the offense and the rewards PwC partners receive is huge.
The loss for BT’s Italian branch was £530m – it wiped £8bn off BT’s share price at the time and chief executive Gavin Patterson eventually paid with his labor .
At PwC, profit per partner for the year ending June 2022 reached £920,000, up sharply from the previous two years. In other words, the fine imposed by the FRC was less than three partners’ income. The regulatory trauma was simply the cost of poor business management.
Reputational damage, yes. But since there are so few audit choices for clients, it’s a good job if you can get it.
Anyone who delved into David de Jong’s book, Nazi Billionaires: The Dark History Of Germany’s Wealthiest Dynasties, could only feel contempt for the efforts of the Porsche clan and Piech to tighten their direct control over Volkswagen and an initial public offering. for Porsche.
It is amazing that families who built their immense fortunes working with Hitler still wield such authority over German businesses.