In the UK National Insurance (NI) is in some ways similar to Social Security in the USA. Contributions are paid by both employers and employees. By doing so employees are entitled to certain benefits. The amount you pay depends on how much you earn and whether you are self-employed or not.

The Labour government plans to increase all contributions by 1% in April 2011 thus hoping to raise  money to protect front line services in the public sector. The Tories say if they come to power they will scrap the increase. The debate has been robust and Gordon Brown has attacked the Tories in no uncertain terms.

And so to cut six billion pounds from the economy now, as the Conservative are suggesting, would risk reversing our progress and creating a double-dip recession.

This mantra has oft been repeated by Labour speakers and the punditocracy of the left. But each time it is used it merely serves to underline the reason why there is no such thing as a prosperous socialist economy. To Brown (and other believers in the efficacy of big government like President Obama) the formula is quite simple

THE ECONOMY = THE GOVERNMENT

So let’s just get it straight, Gordon. Scrapping the 1% NI increase will not cut six billion pounds from the economy. It will still be there but, instead of flowing into the coffers of Whitehall to be then redistributed as largesse to whoever takes the government’s fancy it will remain in the pockets and purses of employees to spend or invest as they wish and keep down labour costs for employers, especially for those small businesses whose survival is essential for the recovery of our economy.

Simple….