National Insurance set to rocket again in the Budget

Gordon Brown's speech at Advancing Enterprise 2005 contained what some will see as the 'usual double speak and platitudes'.

Amongst other things he admits that up to 5,000,000 jobs could be outsourced within the next 10 years, and goes on to tell UK workers that they have to be "more enterprising" to compete:

"And in this global restructuring that focuses advanced industrial nations away from low skill, low tech products and processes to the technology driven and high value added, Britain will not only have to be more enterprising and recognise there is no escape from an uncompetitive position by resorting to protectionist shelters or tolerating the old inflexibilities but we must also understand that as emerging economies their technologies – even now India and China produce 125,000 computer science graduates a year and Britain only 5,000 – Britain will only attain a new and competitive place for ourselves if we strive for, and win, world leadership in science and skills and enterprise."

He spoke of the forthcoming budget, and added: "It is because we recognise the limits of government that we have already removed the independent audit requirement on small firms and moved to a more simplified system of VAT.

"And for all businesses large and small we have removed or reformed over 400 separate regulations; the Financial Services Authority have introduced a series of reforms to reduce compliance costs; and in the budget we will do more."

He failed to mention the 60+ additional taxes he has imposed on UK workers, nor how many additional regulations such as IR591, IR35 and S660 they are exposed to. Brown briefly mentioned the report alluded to in the pre budget report which suggests a review of the whole area of small business taxation, and which hopefully will lead to an end of the uncertainty regarding IR35: "I have set in train a major review – led by Philip Hampton - of the complex, often out of date systems by which regulations are inspected and enforced."

The most worrying of his comments were concerning National Insurance. Seen by many as a favoured revenue generator for the government in recent years and a 'stealth tax' by critics, Brown has signaled his intention to increase contributions once again:

"To pay for improvements in health care we have raised national insurance by 1 per cent – but to put the costs in context, business costs for health care have been rising much faster in the US - by more than 10 per cent each year - and in France employers pay health insurance of around £60 a week for an employee on average earnings and in Germany around £30 a week, compared to just over £10 a week in the UK."

It is fairly safe to say that freelancers will be worse off once again after this budget. The question is by how much.


16th February 2005

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