News
Industry blasts employers' National Insurance contributions increase
The print industry has warned that further increases in employers' National Insurance (NI) contributions could be "very damaging" for the sector after the CBI urged the government not to pursue its tax on employment.
Earlier this week, CBI director general Richard Lambert published an open letter to chancellor Alistair Darling, that claimed such an increase in the current climate was "ill-conceived".
"Other, less distortive methods of raising revenue should have been considered," he said. "The CBI feels strongly that imposing an extra tax on employment will jeopardise jobs at a time when the economic recovery is likely still to be fragile."
Richard Pullan, managing director of Kingsway Printers, said the increase was "an easy tax" to make more money and one that could be very damaging for the sector.
"Any company that is making minimal margins, especially in this climate, could see profits wiped out with such an increase," he added.
"It could be very damaging and, if a new government comes in, it’ll probably be one of those taxes that they don't touch for a few years anyway."
Following the extra 0.5% increase announced in last December's pre-Budget report, the employers' NI rate is set to increase by 1% from April 2011, raising around £3bn a year for the Treasury.
Martin Lett Jnr, managing director of Marstan Press, said such an increase would immediately add around £12,000 to its annual wage bill.
"It's another cost we don't need. We do look at NI contribution when considering employment, but I don't think it would prevent us from taking extra staff on.
"It is like the government are clawing back the cut in VAT we had last year. It's give with one hand and take with the other," he added.
This was echoed by Longridge Print managing director Neil Long, who said the trouble with additional increases is that they could not be passed on to the customer.
"At least we would all be in the same boat, but it would definitely make me think twice about taking on extra staff," Long said.
Long: would think twice about taking on extra staff
Comments
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Andrew Brown - 09 March 2010
When the BPIF hit out at the planned increase in National Insurance \(NI) unveiled in December's pre-Budget report \(PBR), calling it an "attack on job preservation", we got little support from your regular correspondents for our stance. See http://www.printweek.com/business/news/973386/BPIF-slams-National-Insurance-rise
It is encouraging therefore to see the comments quoted from Richard Pullan, Neil Long and Martin Lett Jnr in highlighting the adverse impact of this damaging extra tax on jobs. Well said guys. Let's hope someone's listening this time!
Jon Fennell - 09 March 2010
Andrew, no doubt NI will bring more hardship to struggling businesses, that won't be denied.
But as you bring up the subject of the BPIF ''Hitting Out'', what happened to this?
http://www.printweek.com/business/news/874387/BPIF-submits-pre-pack-suggestions-government-enquiry/
Can I ask what BPIF has done on this since Feb last year?
Why was this not a feature at last weeks meeting?
Why didn't Mr Johnson ''Lambast'' the minister on this as well as promotion? (No I am not decrying Mr J's comments on the promotion of the industry).
Don't you think is a little off that you can criticise this forum for lack of support on NI, yet this forum has been hitting at pre packs and industry promotion for at least a year (a subject BPIF also dropped). I would say the BPIF's input on both topics and support has at best been little more than a small amount of PR. Perhaps you would like to divulge which BPIF members have pre packed and terminate their membership, or is it there are too many?
As a self appointed ''industry federation'' it would seem you could have done more to gain support beyond your members, more vocal support promoting Two Sides other than to the membership would have welcomed. Perhaps BPIF would like to use some of its government funding to support the now ailing Print IT, after all it has the industry interests and promotion as its main aim.
''Let's hope someone's listening this time!'', I agree Andrew lets hope someone is, pre pack and promotion is something we stand a fair chance of sorting out, NI probably is a no win battle.
Mark Snee - 09 March 2010
[quote user="Andrew Brown"]we got little support from your regular correspondents for our stance[/quote]
As I was the first to post on the thread you have referred to, I guess you may have me in mind, Andrew.
What I pointed out was that the government's budget deficit this fiscal year was projected to be £178 BILLION and the employer N.I. increase was going to raise an estimated £3.4 billion only. I asked you how the BPIF would reduce this deficit, but so far there has been no alternative suggestions offered.
Surely the BPIF is not living in Wonderland where budget deficits can just go on forever, taxes don't go up and spending doesn't get cut? Fine, criticise the N.I. increase - no-one wants it - but I ask again, how would the BPIF deal with the problem - VAT, Council Tax, Corporation Tax, Business Rates, Income Tax, what?
'Not A Doctor' (NDCT) - 10 March 2010
Thanks for the link, Mr Brown.
I enjoyed the cartoon again...
Chris Lavers - 10 March 2010
I'd like to mention where I stand on the proposed NI increase - it is a tax on jobs. While it may not affect employees directly (well, not 99.1 out of 100 (I'm roughly accounting for the LEL-UEL NI-able bit), it will affect employers (extra costs to absorb the increase, pain and cost of laying off a familiar face and valuable staff member, etc, etc)). There are more employees than employers, and there is universal suffrage, so it is a cynical ploy by our government to reap the most tax by losing as few voters as possible, in my book. And boy do they need it considering all our money they've spunked over the years.
Whatever next, a tax on staple foods?
Jon, me and you are doing the pre-pack thing through the PrintWeek community. We'll work it through, somehow.
Edward Lear - 10 March 2010
The NI increase is an issue but a bigger concern
is the pre-pack problem.
Last Jan ANDREW BROWN said he was going to speak to the Government about pre-packs.
Surely by now the BPIF should have some clear policy and direction on this. How can we lambast the Paper Merchants for not having a clear policy when our Industry Federation doesn't.
Will Andrew answer questions put forward by Jon Fennell above...
Albert Einstein - 10 March 2010
I have to say, a 1% NI increase whilst NOT WARRANTED should not present a problem to a business that wasn't going to have a problem anyway. Sorry, but that's a FACT.
Edna Bag - 10 March 2010
Popped in 'ere to look an' see if Mr Brown had bovvered to respond to Flannel's questions, from the looks of it he ain't listening and furthermore he must be wearing 'is welding helmet cuz he ain't readin' neither.
Think the pots calling the kettle black, can the BPIF enter some form of constant rapport with this forum?, we are all supposed to be on the same side, or is it you think the tail wags the dog?.
Andrew Brown - 10 March 2010
I'm always prepared to listen to you Edna, but sometimes my day job gets in the way of making a quick reply.
Jon Fennel is incorrect in asserting that the BPIF has "dropped" the issue of pre-packs. I can assure you that this is an issue which the BPIF takes very seriously and which we have firmly on our agenda. These arrangements have attracted fierce criticism from both creditors and competitors alike. Creditors \(such as BPIF associate members and members supplying trade services) are aggrieved because they have lost monies owed to them, and competitors \(such as BPIF members) because they are now faced with a rival who has a clear trading advantage, especially if they themselves are still heavily laden with debt. The BPIF has therefore taken a number of actions in response to this.
The insolvency profession often defends pre-packs by saying that small businesses trade on their reputation, and so a quick administration is essential to preserve contracts and jobs. They also point out that the in-house management may be the only people making an offer. However there have been cases where insolvency practitioners have helped sell a business back to its original owners free of debt, without considering marketing the business, or where they have proactively targeted failing businesses to offer the owners an easy way out of debt. We therefore submitted written evidence to the BERR Select Committee enquiry into the Insolvency Service arguing the case for reforms of insolvency legalisation to address this. This has not yet fed through into Government proposals for changes in legislation and so clearly there is more to do here. It remains one of our key lobbying priorities.
We have also publicly encouraged suppliers to refuse credit facilities to prepacks until the new owners have at least demonstrated some willingness to pay off past debts. Normally this would involve continuing to supply but insisting on payment up front, although in notorious cases suppliers should consider not supplying at all. Some were quick to respond by publicly supporting our call, and others have followed in practice by restricting credit facilities to pre-packs. We will continue to raise this issue with key supplier groups.
A number of members have expressed particular concern regarding 'same director' pre-packs, and have expressed the view that such companies should be debarred from admission into membership of the BPIF. At its meeting today, the BPIF's National Council agreed that in the event that any company goes into administration, their membership should automatically cease, with any representatives of those companies automatically precluded from holding any office in the BPIF from the date of administration. They also agreed that a moratorium on the admission into membership should apply in respect of any company formed as a result of a pre-pack administration for a period of two years from the date it commences trading, save where the directors offer a legally-binding guarantee to repay outstanding debts owed by the previous company within a period of twelve months. A prospective member would only be admitted earlier than this provided their application to join received the support of the Regional Board concerned. However the BPIF's Constitution will need to be amended in order for these changes to the Rules to take effect. A resolution from the National Council will therefore be submitted to our AGM in July this year, for approval by members by majority vote on ballot. This proposed change to the Constitution would not apply to any pre-packs already in membership of the BPIF or to any pre-packs purchased by companies already in membership of the BPIF.
By the way Jon, the BPIF isn't a "self appointed" 'industry federation, as you put it. Our activities are governed by a Council of elected member representatives, to whom the BPIF executive is fully and regularly accountable. We are able to do what we do because we enjoy the financial and practical support of printing companies through the membership subscriptions and commercial income we receive from them. We earn this money by providing cost-effective products and services that add real value to their businesses. Neither are we awash with Government funding, as some people seem to think. Where we do receive grants these are tied to specific projects with a tightly defined remit and specific deliverables – this applies to all Government funded projects, including RDA-funded ones as well as training grants from the Learning and Skills Council. The idea that you can divert such funding to whatever and to wherever you choose \(even noble ventures such as Print IT!) is simply unreal. Funds we receive are typically used to provide training, business improvement etc directly into companies, with strict limits placed on the amount that can be used by BPIF itself to cover management and admin costs. You'll find this is the case with all Government funding and in addition, if you don't deliver, you don't get paid.
I'm very surprised by the way that the efforts the BPIF has put into supporting the Two Sides campaign to promote the effectiveness and sustainability of print should be called into question. BPIF members receive regular updates on how we are supporting this initiative.
Now before I go, back to the subject of NI \(that is what we started with wasn't it?), Mark Snee asks "how would the BPIF deal with the problem - VAT, Council Tax, Corporation Tax, Business Rates, Income Tax, what?" Well I think the Government might start by driving improvements in public sector efficiency, cutting waste in public services and containing labour costs. Public sector tendering could also be reformed and simplified. Surely this need addressing first before we start contemplating tax hikes? But then if I knew the answer to resolving the UK's staggering fiscal deficit........
Jon Fennell - 10 March 2010
Andrew, thanks for your response and sharing information on what BPIF are doing in the background.
May I ask why BPIF don't do this more often? it would take a away assumptions that are made by myself and others.
You have to agree that the last article was Feb 09 and yet since little to nothing has been forthcoming from BPIF as to what is being done. You have probably read the amount of postings and seen that forum members are writing to MP's and contacting IS over the whole ridiculous situation that is Pre Pack.. BPIF have chosen to keep quiet throughout this, any reason?
Could BPIF's lobbying efforts not be made better by working with this forum and thus engaging the potential support of a larger group? I am not knocking back BPIF's efforts, but you can maybe see what I am getting at, isn't it in all our interests to work together on common interests namely pre packs and industry promotion.
What does BPIF have any ideas on what could be done to protect the legacy of Print IT, is BPIF prepared to push Two Sides at any level outside of its membership?
Edward Lear - 10 March 2010
Thanks Andrew for responding regarding the pre-packs it's refreshing to get some clarity on this issue.
Moving this forward the BPIF have associate members who are Paper Merchants. In the North West regional board Tony Scott for instance who works for Paper Co.
Would it be possible to press the matter to these associates? Currently it's my understading the only Paper Mechant who has a pre-pack policy is Elliot Baxter.
Mick Hart - 10 March 2010
An excellent piece Andrew, which I am sure will be met with relief from many of us that are trying to achieve similar goals, albeit by different routes - some more conventional than others!
It must do the BPiF a lot of good when it is seen to engage with groups other than their membership, and many of whom do not have the insight that those members enjoy. Hopefully engaging in this way might lead in the longer term to improved relations with (and within) the whole of the industry, and a renewed support of the federation. I don't think anyone realistically thinks the BPiF aren't the right people to represent the industry at national level, but I do share in the frustration sometimes expressed with their lack of communication with the industry as a whole. After all, it does represent the whole industry, which I guess is what Jon, and others refer to as 'self appointed' industry leader, as often the perception is that only members of the federation are represented, and unfortunately that is only a small proportion of the number of companies in our industry. Hopefully this will improve in time as well.
I think that as long as we are all barking up the same tree, as far as the insolvency issue goes, there is no harm in this type of exchange, in fact it is probably a good thing. There are often several hundred people watching these posts at any one time, and for those people to see everyone on here demonstrating real passion about this issue can only be helpful, and bring things into the open. It can only bring further pressure in support of your aims, and reinforce your views, which, happily, concur with the majority view here.
Certainly in this case, this forum is being supportive, by bringing pressure to bear admittedly, but it should act to reinforce your own aims and I, for one, hope that it is received in that context.
Mark Snee - 11 March 2010
[quote user="Andrew Brown"]Funds we receive are typically used to provide training, business improvement etc directly into companies, with strict limits placed on the amount that can be used by BPIF itself to cover management and admin costs.[/quote]
Correct me if I am wrong Andrew, but LSC contracts pay on a 'tariff' based on 'numbers in learning' and depending on their age and which programme they are enrolled upon. A percentage used to be retained for successful completion of the qualification and/or programme, which at one time was as little as 10% of the total funding available. There is no limit placed on the amount that a training provider can spend on management / admin costs under these contracts, or therefore the amount of surplus / profit that can be taken from the contract and used as general income.
One of my complaints many years ago was that publicly funded training schemes were expected to generate an income for the BPIF of up to £0.75 million a year (under Tom Machin if I remember rightly - that was his budget). My view of that then (and I said so much to your disgust) was that it represented money taken OUT of training for the industry, not investment IN training.
Not being privy to current BPIF internal management accounts or budgets I cannot say whether that is still the case, but certainly one of your training co-ordinators told me last year that the BPIF was generating a significant amount of money from its LSC contract.
Good to see your response overall though, Andrew, and delighted to see that public opinion / forum comments (?) have resulted in a change of stance by the Fed on pre-packs. I think you know as well as me that tax hikes are not only inevitable but likely to be massive. Reading the small-print on the business rates demand that arrived today revealed that from 2011-12, empty property relief threshold is being reduced from RV £18,000 to RV £2,600, so another big cost about to be dumped on some people next year.
Chris Lavers - 11 March 2010
Thanks for your blog, Andrew. Much appreciated.
Jon, that's me off the hook. Turns out the BPIF is doing everything I need it to do already.
Jon Fennell - 11 March 2010
[quote user="Chris Lavers"]
Thanks for your blog, Andrew. Much appreciated.
Jon, that's me off the hook. Turns out the BPIF is doing everything I need it to do already.
[/quote]Chris your right, what a marvellous institution the BPIF are. They are so busy in the background looking after our interests.
Knew we could rely on them.
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