A threshold win - after two decades

It was a lacklustre budget that did little to address creating the conditions for economic growth, and saw the UK saddled with the highest tax burden in 70 years. But there was one small victory to celebrate.

For over two decades the Adam Smith Institute has tirelessly and repeatedly made the case for bringing the threshold at which National Insurance is levied up to that at which income tax is levied. National Insurance is a tax, not an insurance premium, despite its name, and it was always unjust to tax people who were below the minimum wage the government deemed necessary.

Finally, after more than 20 years, the thresholds are to be equalized. It is one small but much appreciated victory for common sense and fairness. It is small, however, compared to the stealth taxes imposed elsewhere. Rishi Sunak has been a tax-increasing Chancellor, not a low tax Chancellor. Unlike Nigel Lawson, who with Peter Lilley used every budget to lower taxation and abolish at least one tax, the present Chancellor has raised at least 15 taxes during his term. He uses fiscal drag, freezing thresholds and allowances to pull people into higher tax brackets by inflation so that it does not show to the general public as tax increases, but it does show to economists.

The increase in the National Insurance levy by 1.25%, the so-called “Rishi Tax,” will increase the costs of employment and put up prices generally. This is especially true of businesses where wage costs form a large part of operating costs, such as the hospitality industry. People will blame “inflation,” not seeing that the “Rishi Tax” is a major cause of the higher prices.

But one small victory is better than no victories at all, and it is a cause for celebration that we will no longer tax, via National Insurance, those earning below the minimum wage. So we thank the Chancellor, along with others who came late to this game and added their support to our campaign. Sometimes we have to take the long view, as we did with fair treatment for Hong Kong people and Freeports, but we are prepared to put in the years if it takes years. We have a huge agenda, and will still be here to advocate it long after this Chancellor has moved on. We therefore celebrate a small victory today, and hope for bigger ones tomorrow.