Not since National Insurance Contributions were first introduced to fund the new welfare state, can a change in their rate have generated so much attention. Though the ferocity of the debate has been surprising, it's not hard to see why it's become such an important issue. With the next government facing a massive task to reduce the public sector deficit, business naturally worries that it will end up footing a significant part of the bill. The two half point increases in NIC rates therefore sent out the wrong signal to business, particularly as the second one funded an increase in government spending rather than paying down the deficit. For manufacturers struggling to rebuild their margins after a particularly serious recession, this increase in costs was also particularly unwelcome.
Manufacturers were therefore pleased by the Conservatives' announcement of a partial reversal of the NICs increase but for many the welcome was a wary one. Until we get the full details of how the next government will reduce the deficit, manufacturers can't start making plans for the future with any degree of confidence. And that's why the level of debate this week has been so disappointing if not surprising.
Over the coming weeks, we challenge all the main parties to start debating the real issues. For example, what will be the balance in spending cuts between capital and current spending? How will they go about deciding which areas to cut? Do they have any fresh ideas about the relative roles of the public and private sector in providing public services? And how can the government start to reform the tax system to create a more balanced economy?
Manufacturers won't be holding their breath that they will get much clarity on these issues in the next month but is vital that the next government starts to answer these questions very soon after May 6th.