Budget's productivity slump to be addressed by Reeves, yet her verbal promises may lack substance
In recent news, two significant topics have been making headlines: the effect of the National Insurance (NI) rise on the UK economy and the case of Parwiz Hanifyar, a migrant living in Britain.
The National Insurance Rise and its Impact on the Economy
The National Insurance (NI) rise, effective from April 2025, has significantly increased business employment costs. The employer's NIC rate has risen by around 1.2-1.25%, from about 13.8% to 15%, and the NIC secondary threshold has been reduced from £9,100 to £5,000. This means employers must pay NICs on a larger portion of employees’ wages, including lower-paid and part-time workers.
The UK GDP growth showed a modest increase of 0.3% quarter-on-quarter in Q2 2025, but this growth was primarily driven by government spending rather than private sector investment or consumer spending. Business investment fell 4% in Q2, and gross fixed capital formation decreased by 1.1%, indicating that higher NI costs may be constraining private investment. Consumer spending growth was also subdued at only 0.1%, which may reflect constrained disposable incomes partly due to increased employer National Insurance costs impacting wages or hiring costs.
While no direct attribution to the NI rise alone is given, the increased employment costs could discourage hiring and business expansion, potentially impacting productivity growth negatively. The government's spending has temporarily supported GDP growth, but private sector dynamics reflect strain potentially linked to the higher employment tax burden.
The Case of Parwiz Hanifyar
Parwiz Hanifyar, an Afghan migrant living in Britain, has been making headlines for a different reason. Evidence suggests that Hanifyar poses a danger to women, and his disturbing statements about killing his wife if she is unfaithful have come to light. Furthermore, it has been revealed that Hanifyar has come to Britain illegally and is living in a four-star asylum hotel. The uncovering of his disturbing statements adds to the reason for his deportation from Britain.
In summary, the National Insurance rise has increased business employment costs significantly, which coincides with a decline in business investment and muted consumer spending growth. This suggests the NI increase may be a headwind on growth and productivity in Britain. On the other hand, the case of Parwiz Hanifyar serves as a reminder of the importance of ensuring the safety and security of British citizens.
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