Why I’m quitting the Conservative Party

Why I’m quitting the Conservative Party

“Levelling Up” should not be a meaningless catchphrase. If Levelling Up is to mean anything then surely it should mean that those currently without wealth can work hard, strive, take opportunities and earn money to provide for themselves and their family, and to in the words of the Prime Minister “keep more of their hard-earned money” as seen in the tweet above. Today’s tax rise on that “hard-earned money” via National Insurance is a slap in the face against the concept of Levelling Up.

Apologies in advance for maths, but it is important to calculate the Real Marginal Rate of Taxation. Employers National Insurance is a Direct Tax on Jobs, in the same way as Fuel Duty, Alcohol Duty, Tobacco Duty etc are Direct Taxation. The price for Wages may not be as immediately elastic due to contracts and the spacing of pay reviews etc but the market rate for prices will always ultimately consider Direct Taxation. Higher direct taxation leading to lower pay reviews, or lower salaries offered for new employees, will ultimately mean lower take home pay. Over time for any salary above the legal minimum wage, to deny Employers National Insurance is a tax on salaries just because it doesn’t appear on a payslip is ultimately as facetious as to deny that Fuel Duty is a tax on fuel simply because the duty doesn’t appear on a VAT Receipt – it is quite literally in the words of George Osborne a “tax on jobs”.

Following the announced tax rises, if an Employer has a budget of £100 to increase a Basic Rate Employee’s salary, then that will break down as:

Employer’s NI £13.08

Income Tax £17.38

Employee NI £11.52

(Student Loan if applicable £7.82)

Total Tax £41.98 (or £49.20 in deductions)

Net Wages £58.02 (or £50.20)

A young person today who works hard, goes to University and gets a Basic Rate job will be facing a Real Marginal Tax Rate of 49.8%.

Meanwhile both forms of National Insurance are not taxed on unearned incomes, meaning that two people on the same gross income can be taking home very different net incomes. If someone who has the exact same income, but not via a job eg by letting out properties and collecting profit from rent instead, then they merely face a 20% marginal tax rate instead and no tax rise from that today.

Only allowing some people on Basic Rate Tax to keep half of their marginal income, instead of the 80% of their income that those earning the same income through non-salaried means get to keep is not by any definition Levelling Up. When only those working for a living are facing today’s tax rises, while this tax is in no small part going to benefit those who are already independently wealthy so that they don’t need to use their own ‘Rainy Day Fund’, nor does it mean we are “all in it together”.

Somewhat ironically today’s tax rise which is only levelled on earned incomes means that low paid care workers will now see their take home pay go down, in order to pay for the care of their potentially quite wealthy residents they are caring for – in order to ensure their resident’s relatives can have a larger inheritance. After clapping for carers, is that what was meant by Levelling Up?

I have been a Conservative supporter, member and activist almost my entire adult life, even backing and tipping on this website the current Chancellor of the Exchequer as Next Prime Minister at 250/1, but I will not support breaking an election “guarantee” and now effectively taxing basic rate graduates half of their marginal income, or basic rate non-graduates 42% of their marginal income. Today in considerably increasing the tax on jobs and wages while apart from dividends leaving unearned incomes not taxed any higher, that same Chancellor I once tipped, and the Prime Minister and his Party, have lost both my support and my vote.

Philip Thompson

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