We Need a Budget for Honesty
We Need a Budget for Honesty
In 1946, George Orwell published his famous essay "Politics and the English Language". In it, he argued that politicians fall back on tired phrases and waffle to mask their real meaning; that "when there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink".
This has not changed. In fact, it has become considerably worse. Orwell would be astounded at the way today's political elite use language to gloss over reality; casually throwing meaningless phrases around like confetti. Ready-made phrases are the norm, and nowhere does language 'perform the important service of partially concealing your meaning even from yourself' more than in debates over public spending.
Around Budget time we hear a lot about "fiscal overhang", "deficits", "consolidation" and, everyone's big favourite, "quantitative easing" – even many politicians don't fully grasp how this one works. These words tend to freeze people out of the public debate about how their tax money is spent. If you can't understand something, you can't decide whether it's a good thing or not.
These euphemisms can also allow governments to get away with spending unsustainably, usually on big voter hand-outs, without justifying the consequences of their actions. That's because it's much easy to say you're going to "run a higher deficit" than "spend another £10bn a year more than the government receives, on top of the £100bn it's already overspending". And it's a lot easier to say "we're investing another £1bn in our future", rather than "we're taking another £1bn from taxpayers' money to spend on something that may or may not make living standards better in the future".
Last chance to make a clear statement
Next week's Budget is the last chance to make big changes before the general election. And it's the last chance we have to make ourselves crystal clear and set the terms of the economic debate for the next few decades. The Conservative-led coalition has shown that it is capable of dealing with our country's short and medium-term fiscal problems by getting the deficit under control. As a result, Britain is now one of the fastest-growing countries in the OECD.
While I am hopeful that our long-term economic plan and referendum commitment can reunite the Conservative family behind us, the dangers of a Labour government cannot be understated, given the electoral calculus and Labour's failure to learn that overspending is what brought this country to its knees. So I'd like us to use this opportunity to do something radical that will change the political landscape. I want us to change the words we use to describe our taxes.
National Insurance is Earnings Tax and Jobs Tax
National Insurance is not an insurance scheme. It's a tax. First, the rate you pay is determined by what you earn and not some risk premium. Secondly, the vast majority of National Insurance is used to pay non-contributory welfare benefits. Thirdly, the introduction of the single flat-rate pension and Universal Credit will cut the last frayed links between National Insurance and contributions. It will become what it already is: a second Income Tax. National Insurance is split into two parts: Employers' and Employees' National Insurance. Employers' National Insurance is a tax on jobs and workers, plain and simple.
Because Employers' National Insurance doesn't often appear on people's wage slips, many are simply unaware that their boss has to pay another 13.8 per cent to the government on top of their salary every year. This means hiring a new member of staff at £24,500 costs another £2,000 in taxes to the government – every year. If employers didn't have to pay this dangerous tax on jobs, they could hire more people – and possibly at a higher wage too.
This year the Chancellor has an opportunity to restore some honesty to the debate – and our tax system. He has the opportunity to break from the tired phrases and jargon and start calling these insidious taxes by their proper names.
A Conservative colleague, Ben Gummer MP, has proposed renaming employees' National Insurance: the Earnings Tax. I'd go one step further and call the employers' element: the Jobs Tax. That would certainly be refreshing and more transparent.
Let's make it clear what we're talking about
A simple change of language from National Insurance to Earnings Tax and Jobs Tax would not only be the honest way forward but it would also ensure that everyone clearly understands when any changes to these taxes are made in the future.
If next year, a party tries to increase these taxes, it would be clear what they were aiming to do: take more of people's money and destroy more of people's jobs. With this kind of clarity, it would be a lot harder for any future government to fudge its words. Anytime a Labour government tried to hike the Jobs Tax, the public would start to ask serious questions.
Before last year's Budget I called for a number of changes to boost growth. Since then, the Chancellor has slashed National Insurance for small businesses and scrapped it for young people. These are fantastic steps but, this time around, the Chancellor has an opportunity to make a firm footprint on the history of our tax system. Renaming National Insurance, if not now then at least before the next election, would change the debate for the better for decades to come.