Category Archives: money

You’re NICked…

First of all let me declare an interest : I spent the best part of the last 20 years of my working life as a self employed contractor in the IT industry. I’m also a chartered accountant so I was particularly interested in what the Chancellor had to say yesterday about National Insurance contributions.

There’s been a lot of nonsense spouted by various self employed people over yesterday’s announcement, not least of all by one particular blogger – whose blog I’m banned from accessing – that I read this morning (working well, that ban, isn’t it?) who simply doesn’t seem to understand the situation at all, frankly. However, in the interests of fairness, you can read his slant on all this here even if I’m not allowed to! (sic.)

What the Chancellor has done is to abolish Class 2 NICs and incorporate that saving into the Class 4 NIC. The Class 4 NIC has then been increased by 1% this year and a further 1% next year.

The bleat from the people who don’t like this seems to revolve around around their employment rights. The self employed have no employment rights, so the argument is irrelevant. The government provide the NHS and a state pension in return for NI. Here’s an important point : The State Pension has been changed so that self employed people now have the same pension rights as employees. They also have the same access to the NHS, so why should they pay less?

Even after these changes, the self employed still pay a lower NI contribution that employees whilst getting the same access to the NHS and the same pension rights. Employees pay 12% compared to the current Class 4 rate of 9%. Over £43,000 p.a. everyone pays 2%.

The net effect of the changes is that self employed people earning under £28,000 per annum will pay less NI. From £28,000 to £43,000 they will pay the same. Over £43,000 they will pay more.

This seems fair to me. Maternity rights, sick pay and paid holidays are not the responsibility of the government. When I worked as a self employed contractor, I earned more than I would have done as an employee. This was precisely because I had to earn enough to cover unpaid holidays, sickness, gaps between contracts and the like.

There is a class of people in this country and others who believe that things should be given to them as a right and that they shouldn’t have to contribute in order to get them. My fellow blogger’s rant calling the government ‘thieving scum’ and the taxman a ‘blood sucking leech’ shows a fundamentally bad attitude and is typical of the ‘something for nothing’ mentality. I won’t bother to argue the case with him because that would be like trying to teach a pig to sing.

The case for this change is clear. It’s about fairness. If you want the same rights, then you should pay the same contributions towards them. And, at the end of the day, nobody forces you to become self employed. It’s a choice for you as it was for me and I fail to see why there should be a financial incentive funded by employed people for you to do so…


Maximum wages and punitive taxation


I admire Jeremy Corbyn. No, really. I do! He’s such great entertainment value. A bit like Donald Trump only considerably less consistent and without the logic or practical aspects. Our Jezza is just priceless…

His latest idea is a cap on wages. This is, of course, not a new idea. It’s been done before by the Wilson government. In those days there was a 98% top rate of tax comprising 83% income tax plus 15% investment income surcharge. My memory of the time is a bit hazy so I looked it up. I was a teenager at the time but remember my father complaining that Labour were taking 105% of his top slice income. As it turns out that was a bit inaccurate but nevertheless 98% is bad enough.

So what happened? Well, high earners fled the country in droves. Reportedly 750,000 British taxpayers were liable for a 98 percent tax rate in 1974. Take, for example, the Rolling Stones. Reflecting on the time, Bill Wyman said in the band’s DVD “Stones in Exile” that if a band member made a “million quid,” he would be taking home only £70,000. “It was impossible to make enough to pay Inland Revenue. I had to get out of the country to pay the tax that was incurred on me,” Keith Richards remembered.

The Stones weren’t the only ones. Actors left in drove too. And top business people. The rich have the power and the means to just go off to places where the tax is less punitive. The problem is that they takes jobs and investment with them. No wealth, no job creation or entrepreneurship. It’s all gone abroad – and at the end of the day, it’s a global marketplace we’re living in.

So how about the so-called ‘John Lewis model’ where the top man’s pay is pegged to a multiple of the lowest paid worker? Better, but still bad for business. Top companies will just move their headquarters to other countries, killing the UK jobs in their offices and factories. There they can still pay high salaries to attract top people.

There is only one country in the western world that has a maximum wage in place, and that’s Cuba – but before my old friend Longrider starts kicking off about Cuba again, I’m forced to point out that Cuba has a rather curious dual currency system. It’s been said that the maximum Cuban wage equates to about US$30 a month but there is a an external currency and an internal currency, so the equivalence is meaningless. Locals are paid in local currency and they buy stuff in local currency. It’s worthless outside Cuba. As I said, a curious system…

Also, the wages paid to top executives in private companies is a matter for the shareholders, not the government. Corbyn reckons he wouldn’t give government contracts to companies who pay excessive executive salaries. He won’t put a figure on it and it’s unworkable because there’d be nobody left to give the work too!

So, maximum wages pegged by punitive taxation doesn’t work. Government interference in executive pay doesn’t work. In fact, the entire premise of 1970’s socialism on which Corbyn bases Labour policy doesn’t work.

Cheats of the Week

Say hello to Caroline Banks and Karl Bradsell who have been jailed for claiming that they were too ill to cook their own meals when they were actually running a cafe while illegally pocketing £135,000 in benefits.

Banks said she was unable to walk unaided, needed a wheelchair and required help using the toilet. She claimed to have a long list of illnesses, including a slipped disc in her back, angina and depression. Her home was adapted with a stairlift and a wet room while she was claiming Disability Living Allowance, Employment Support and Housing Benefit, among others. She also had a mobility car so friends and family could drive her around.

She was filmed working long days on her feet, lifting tables and chairs and serving customers at the cafe. On one occasion, she was even spotted wearing high heels.

Bradsell said he rented the council house next door to Banks and was single, but in reality he lived with Banks in her adapted home while he sub-let his house to his brother. He claimed to suffer from epilepsy and depression and said he hadn’t worked in seven years and that his condition was so bad that he had fits every couple of days and suffered panic attacks, often wetting himself.

He said he couldn’t drive because of his epilepsy and that he used a microwave because he was afraid of using the cooker but he was filmed driving Banks’ mobility car to and from the cafe, where he cooked and cleaned, and even used the vehicle to deliver food for a Chinese takeaway at night.

They pleaded guilty to 24 charges of fraud. Banks was jailed for 16 months and Bradsell 19 months. Richly deserved IMHO…

Scrounger of the Month

Say hello to Maria Buchan and her 8 kids. Maria lives on benefits. Quite a lot of benefits in fact. Here’s her tally :

£440 a month in child benefit
£1,604 a month in tax credits
£183 a month in income support

Not a bad haul. In fact, that adds up to £26,724 a year. But Maria isn’t finished yet because even though she’s been told she can’t bear any more children, she’s decided to have a couple more using a surrogate. This will add another £70 a week in benefits and increase her chance of getting rehoused from her current 3 bed council house to a 5 bed.

Life on benefits is tough! Oh, hang on – she reckons it isn’t. She says “Being on benefits gives me an easy lifestyle. I have got more than enough money to pay the bills and feed the kids. I am constantly buying clothes for myself and I like to make sure the kids have nice clothes. I treat them to takeaways weekly and they have all got computer tablets apart from the youngest.” Well, he is still a baby.

She’s no stranger to controversy. In February, she had a string of tickets for using a bus lane in Birmingham quashed by pleading poverty. In 2013, she famously complained to the Daily Mail that the £500 cap on benefits was pushing her into poverty. After all, she might have to cut back on clothes and iPads! Scandalous! £26,000 a year? Well you can see her point. She was getting £30,264.

Personally, if I was milking the system for as much as Maria, then I’d be intelligent enough to keep my mouth shut about it.

Yep, life’s tough when you’re living on benefits…

School’s out!

…or not as the case may be!

News this week that the number of parents taking their children out of school so they can benefit from cheaper holiday prices has risen by 75% in the last year or so, and the government has issued ‘tough new guidelines’.

If you take your kids out of school you’re going to be fined £60 per child per parent and dispensation will on be given in ‘exceptional’ circumstances. This has naturally led to the old beef about holiday companies jacking their prices up in the school holidays and ripping off poor, hard-done-by parents.

Well, actually that’s bollocks isn’t it? Simple economics says that when demand exceeds supply then prices rise. If supply exceeds demand, then prices fall. It’s know as ‘price equilibrium’ and it’s really quite simple to understand. At the simplest level, it’s the same reason that vegetables are simpler when they’re in season.

Fewer people go away when the kids are at school, so there are more more vacant holiday places to be sold. Accordingly the price goes down. Of course, it’s far more emotive to see it the other way around, but the fact is that when demand is slack the price drops.

On the BBC the other morning was an unapologetic mother of three. As she quite rightly pointed out, she saved £1,500 by taking her three kids out of school to go on holiday in term time, so even when you knock off the £360 fine, she’s still saving £1,140. Frankly who can blame her. It’s simple economics again.

Parents say that the holiday companies should charge the same all year round. Non-parents say why should they subsidise parents and pay more when they don’t have kids? Each side blames the other, but at the end of the day it’s all down to supply and demand.

And fining parents a paltry £60 isn’t going to change things…