The GAAPweb blog

The real cost of a degree

At the risk of showing my age, I very much remember the days when students who went to university would get a grant (I wish I was one of them). Yes, that’s right: all students got some money, although the amount depended on your family’s financial circumstances. Then came the days of student fees and student loans (just my luck). Today, most students leave university with a large debt to their name.

The Higher Education Act 2004 outlined that a university could charge fees of up to £3,000 per annum, variable from course to course, and varied with inflation by the government. Currently, this stands at £3,290 for 2010/11 academic year. This means that students now take out two loans: one for fees and another for maintenance (accommodation, food etc). This amount can range from about £3,500 to £6,000 per year. Researchers asked 2,000 students from 139 university campuses in England how much debt they had amassed (including credit card, bank debts and tuition fees) and the average was £5,293.

The amount owed is repayable based on income; a graduate pays 9% of their gross income over a £15,000 threshold. The interest is linked to the retail price index (RPI), and any loans outstanding after 25 years can be written off.
  
Having gone though this system, I remember how many friends really struggled to pay for food and other basics after paying for accommodation and fees. Many started part-time work, and this was fine when jobs were available. However, over the past two years, the number of students getting into financial difficulty has increased, with many wishing to work but with no jobs available. The amount of summer jobs available has reduced and consequently, part-time work for students has become much more competitive

Now we have a new coalition government with new ideas. Unfortunately, it is also a cash-strapped government looking for new ways to fund the debts it finds itself in. Vince Cable, the Business Secretary, is considering replacing the Income-Contingent Repayment (ICR) as described above with a new Graduate Tax Scheme.

In principle, the idea behind the Graduate Tax Scheme is that those who earn more pay more for university. In a speech to universities, Vince Cable said: “It surely can’t be right that a teacher or care worker or research scientist is expected to pay the same graduate contribution as a top commercial lawyer or surgeon or City analyst whose graduate premium is so much bigger”.

When I think about it, that is exactly what we do in the real world. The more we earn, the more tax we pay. I believe that slowly we will start to see more students go abroad for higher education; the danger that follows is that they will not return. We will slowly see a shortage of skilled labour that will only push the cost up for these professions: a simple case of supply and demand.

However invaluable education is, the fact remains: if it’s not affordable at the outset then we will lose those with so much potential but who are worried about how they can cope with debt. For those who do take the journey, isn't the government just putting more pressure on those who have so much pressure on them already?

So, what would a Graduate Tax Scheme mean for the next generation of accountants?

I believe that many more students will look to go straight into accountancy immediately after leaving school. The three main accountancy bodies (ACA, ACCA and CIMA) provide options for school leavers. The advantage is clear, you can earn at the same time as studying and if you get lucky, you could even be sponsored by a company.

The reason that more students don’t do that now is because university is a life experience. Additionally, if you have an accountancy-relevant degree, you get many exceptions from the above accountancy bodies therefore reducing time to pass exams.

However, if the cost of going to university goes up two-fold, would you bother? In my opinion, the majority will still go through university but over time the percentage of those who give university a miss will increase.

It would be a shame if student miss out on university life due to costs. Let’s hope the findings of a review by Lord Browne of Madingley, BP’s former chairman, result in an outcome that allows students to experience university life without accruing crippling debts.


Mehul Patel graduated in Actuarial Science from University of Kent before qualifying as a Management Accountant. As the Financial Controller of Trinity Mirror Digital Recruitment Ltd, part of Trinity Mirror plc, Mehul has the responsibly of budgets, forecasting and helping the business and the board find ways to continue expanding.

Onwards and upwards

One question I find myself often asked as a recruitment consultant for the accountancy industry is: “Where will the industry be in 6 months?”. It’s impossible to judge; however, the Alexander Lloyd job index for Q2 – an industry benchmark of job flow – is pointing towards a more positive future for both candidates and clients in the accountancy industry, in both permanent and interim fields.

Taking a hit

In January 2009, senior finance professionals were taking a hit, with companies having to resort to redundancies and stripping down their teams to the bare bones. The months between January and June 2009 showed a severe drop in job flow, with March 2009 performing at 37% under the average. There was no marked improvement and pick up of vacancies until the later summer months. July’s improvement of 8% job flow suggested a confidence in the emerging market, and jobs continued to roll in with only a small decrease over the Christmas period, which was to be expected. Too much turkey equated to a lot less work.

Onwards and upwards

The New Year brought a fresh start, and with it some positive signs of recovery to vacancy flow, with the Q1 Job Index report noting a 113% increase in vacancies registered with the accountancy team’s consultants. The market had picked up and showed real signs of recovery, especially in the mid-level interim and permanent recruitment markets. Fortuitously, this increase has continued.

Within the accountancy market, the amount of permanent vacancies registered in 2010 has increased without exception on the 2009 figures. On the interim side, the June 2010 figures are the highest in the 18-month period from January 2009. There was a slight increase during the end of the financial year towards March/April, once again suggesting that businesses are more eager to spend during this period.
 
The May and June 2010 level of jobs registered have been the highest in 18 months for both interim and permanent accountancy roles.

With 2010 showing an unequivocal improvement on the previous year, it might be time to finally breathe a sigh of relief. The statistics of the report show a respectable increase in the number of vacancies registered, and point to a positive progression in the recruitment market following the negative impact of the economic downturn of the past two years.

Other financial recruitment companies are also experiencing a welcome rise in jobs needing to be filled, indicating that the industry is evidently experiencing growth again after a hard two years. With many businesses having had to close their doors and make redundancies, this news will come as a great relief to the many great candidates in the market. We are looking forward to Q3 and Q4 proving us right.



John Richardson joined Alexander Lloyd in 2003, and currently leads the Accountancy & Finance and Pensions & Benefits divisions. He is a Senior Manager within the organisation and specialises in the recruitment of qualified level Financial Directors and Controllers for both blue chip and SME clients, and also recruits niche roles such as tax/treasury, corporate finance and audit.

Britain’s accountants have got talent

The role of an accountant has, in the past, been predominately seen as a number cruncher. Despite their reputation as professional, trustworthy and ethical members of society, they were often considered to be backward thinkers. However, this role has evidently undergone an evolution over the last few decades. Providers of financial insight, technology and strategy, accountants now take a hands-on approach in guiding companies and preparing business strategies. As a result, the skills required by senior finance staff differ dramatically.

Finance managers, finance directors, chief financial officers (CFOs) – these are just some of the positions that many accountants have gone on to cherry pick. Although CFOs date back to the days of modern accountancy, their prominence has increased as governance and financial expertise have become a key demand of stakeholders. The launch of the big four accountancy firms – Deloitte Touche, Ernst & Young, KPMG and PricewaterhouseCoopers – boosted the status of CFOs in the late 1980s, as did the establishment of regulatory bodies like the International Accounting Standards Board and Financial Services Authority. Today, any board without a Director of Finance would lack a crucial dimension to its decision-making process.

Finance tends to be part of almost every business decision and therefore accountants are more integrated within the organisation. Being able to look ahead strategically is an essential part of an accountant’s toolkit, especially in today’s climate. An absence of skill could lead to bad business decisions, such as ‘cutting the muscle and not the fat’, or failing to invest in the future when times seem very lean. Therefore, training in managerial skills and business awareness are more important then ever before. Those already at the top of the ladder must continuously reinvest in their own development through lifelong learning, and when gaps appear in their knowledge base, they must seek training and support.

Research undertaken by AAT, the leading professional body for accounting staff, showed that accountants already working in senior positions strive to improve their skills in order to deal with strategic issues as best they can. Managers and directors require different skills, knowledge and information, to those working at a non-manager level. Eager to respond to this need, AAT launched an online resource called FMAAT Plus, specifically tailored towards plugging this gap. The membership body’s fellow members can now benefit from podcasts, webinars and events designed to help them increase their skills and overcome workplace challenges.

Delving a little deeper, senior finance staff must possess a broad vision and be able to see things from a strategic viewpoint, rather than a narrow financial and historic perspective. Communication is vital or their message will never be understood and passion, commitment and honesty are a must. Core skills include a high level of intellect, an astute mind and good powers of interrogation. The ability to listen and discuss, as well as direct, is significant to the role – as is leadership. Last but by no means least, they must be able to empathise with the impact their decisions will have on other human beings and stakeholders.

As talented accountants continue to climb the career ladder and steer the reins of business operations, they must constantly be aware of the skills required of them. Striving to improve their own knowledge and expertise will ensure that finance professionals remain at the heart of every business.

For more information on FMAAT Plus visit www.aat.org.uk/fmaatplus


Tom Kelman has been Director of Finance and Corporate Resources at AAT since July 2005.

He is responsible for ensuring the AAT has robust financial controls, strategic reporting systems and assisting his executive management colleagues and the AAT's governing Council in ensuring resources are deployed appropriately to meet the AAT’s strategic business plan objectives.

Tom has worked in finance for over twenty eight years covering both accountancy practice and industry and commerce. He qualified as a CA with ICAS in 1986 and became an MAAT before joining the AAT. Tom is also a member of the Association of Corporate Treasurers and a professional Pension Scheme Trustee.

Thames Valley opportunities knock

For many years, the bright lights and vibrant atmosphere of London have drawn people from all over globe to seek gainful employment within its hallowed institutions and leading commercial enterprises. However, I wish to challenge the assumption that London is the premier destination in the UK for those seeking work. Instead, I point to an area rich in opportunity for the talented individual, and the land I speak of is the Thames Valley.

One of the most common misconceptions is that taking a finance or accountancy role in the Thames Valley will mean a long commute. However, with most destinations reachable from Paddington, Waterloo and Marylebone in under 40 minutes, the average journey time is often similar to that of a standard London commute – and a lot more enjoyable, I would add. Imagine a train on which you get a seat and can read your morning paper in relative comfort, enjoy a similar commute time and in much more relaxing and comfortable surroundings: now you’re interested! Furthermore, travelling by car once again becomes a real prospect for those commuting, since many offices in the Thames Valley have free parking for all staff. Liberation from trains and their exorbitant fees; now I know I have you very interested.

Which firms operate from the Thames Valley? Well, there is Vodafone Country (also know as Newbury), along with such powerhouses as Dell, Reckitt Benckiser and O2. In addition to these instantly recognisable organisations, the Thames Valley also has a number of less well-known organisations. The combination of blue chip and SME firms means that there is an opportunity for everyone – no matter what style or type of organisation you prefer.

Without a doubt, the greatest advantage of working in the Thames Valley is the opportunity to achieve a much better work-life balance. Often offering shorter commutes, many people (especially those with families) find the chance to spend more time with loved ones a great incentive. This, combined with a cheaper and a more relaxed environment away from work, is a key factor in making the Thames Valley – in my opinion – an excellent place to work.

With its easy access, excellent company portfolio and a real balance between work and home life, the Thames Valley offers some incredible opportunities that you would be unwise to dismiss without real consideration.



Liam Griffin currently recruits finance and accountancy professionals for WH Marks Sattin across the Thames Valley region. He currently works within a broad range of clients from industries such as IT, Telecoms, FMCG, Oil & Gas and Retail.

A question of ethics

The spotlight on ethical behaviour has never burned brighter, as media coverage of the Goldman Sachs case demonstrates. Headlines have also homed in on auditor Ernst & Young’s failure to report the controversial accounting practices of investment bank Lehman Brothers. These cases stress the magnitude for ethical awareness within finance and accounting sectors. In response, AAT, the leading professional body for accounting staff, has introduced a ‘Professional ethics in accounting and finance’ unit to be studied as part of its Revised Accounting Qualification.

Clients accountants have the right to expect minimum standards of ethical conduct –know as the fundamental principles of professional ethics. This consists of integrity, objectivity, professional competence and due care and professional behaviour at all times. US lawmakers have accused Goldman executives of helping to inflate the housing bubble and making billions off the market’s collapse. Goldman Sachs has denied any unethical behaviour, stating that they cannot be held responsible because it was a matter of judgment. However, as public opinion holds the bank accountable, minimum standards have clearly been compromised and attempts to justify their actions undermines public confidence.

By introducing a new ethics unit at the Level 3 Diploma in Accounting, AAT is setting students on the right track to manage their own moral dilemmas. Qualified accountants are technically adept and accurate – skills that are straightforward and without question. But softer skills come into play when faced with an ethical dilemma, because they are based on personal judgment in which there is often no right answer. The issue of ethics is pervasive across all areas of accountancy, yet the specifics of ethical dilemmas will differ depending on how the individual is employed.

A common scenario may involve a self-employed member in practice, who is contacted by a solicitor requesting information on a company’s accounts. Trust between an accountant and client is fundamental to ethical conduct, so the matter of client confidentiality can be confusing. Another typical dilemma could involve a married couple who run a company together, eventually split acrimoniously and go on to demand that the other cannot see the accounts. This situation could cause a significant ethical dilemma for the accountant who has to weigh the potential for conflict of interest and breach of confidentiality between parties with whom they might have had a harmonious relationship in the past.  

The AAT’s Conduct and Compliance team are on hand to support and guide members on issues of ethics, although we will not give a definitive ‘yes or no’ answer. Instead, we aim to supply accountants with the tools to make the decisions themselves. Since more than one outcome might be possible, we work with them to determine the most ethical way forward. 

As the UK emerges from recession, it is clear that the unethical behaviour of those responsible for the economic downturn will continue to be scrutinised. As for the accounting profession: these cases should serve to reinforce the potential consequences of immoral conduct. 


Tania Hayes has been Conduct & Compliance Manager at the AAT for 18 months. She oversees conduct and compliance issues, the disciplinary process and professional ethics guidance. She also acts as Money Laundering Reporting Officer, overseeing money laundering supervisory responsibilities.

Outside the box

You’re at a party and someone asks what you do for a living. You say, “I’m an Accountant’”. What sort of images does this conjour up? Well, for many, it amounts to a grey person in a grey suit doing grey work. And, of course, this is sometimes the case. But it’s no longer the norm.

Let’s face it, every business needs an Accountant. Restaurant groups need them, as do advertising agencies, architects and football clubs. I always encourage candidates to ‘think outside the box’ when exploring their career options. What do you enjoy? What ignites your passions? What will get you out of bed with enthusiasm on a dark winter’s morning?

Moving into, let’s say, the media or entertainment sector without a track record in that sector is never going to be a breeze, but it’s by no means impossible. Perhaps you had client exposure during training or subsequently? Perhaps you are so involved in that world in your personal life that you have an in-depth understanding of the issues? Maybe you have a transferable skill that would be highly rated by a prospective employer?

It’s all about making the strongest possible case for yourself. Think about what you have to offer that a prospective employer will want to buy. Where can you add value? How well will your skills or experience transfer across? If you are serious about an ‘outside the box’ role, this first stage analysis is critical as it helps to build your case and focus on the ‘customer’ – i.e. the employer. And be brutally honest with yourself – don’t let dreams or passions cloud your judgement and don’t waste time chasing the impossible dream; do your research and work out where you might fit. A good recruitment consultant should be able to help you with this – balancing your ambitions with a sense of realism.

The next stage is to consider you as ‘the person’ alongside you as ‘the Accountant’. Do you have the right personality traits for the desired sector? Will the cultural fit genuinely work? Will the chemistry be right? Don’t delude yourself here, and try to find out as much as you can about what really goes on inside, say, an advertising group before you make any decisions. Personality is undoubtedly a huge factor; sectors such as these thrive on the ‘big personality’ – including within the finance teams – so, if you’re a shrinking violet, you might need to think again.

With this year’s World Cup and the London Olympics a couple of years further down the line, sport is going to be on everyone’s lips. Have you considered working as an Accountant in the sports, leisure and tourism industries? It’s certainly competitive and salaries are generally lower (often around 15% less than the market average) but, for those with sporting passions, the benefits – such as a box at Arsenal or trackside access at an F1 race – can outweigh the downside. Again, it’s all about making a strong case for yourself.

So, the message is that there are plenty of opportunities out there in some pretty exciting sectors, and although it’s often not easy to find a way in, it’s by no means impossible with the right preparation, planning and perhaps a little help.


Paul Collier is the WHMS Commerce Director heading up the team of 45. Paul has worked within the WH Marks Sattin group for over 7 years, moving up and across the markets. He is currently leading the commerce division into its next stage of development.

Banking on Success

Thinking about a career in the banking sector? Well, there’s never been a better time.

You may be forgiven for thinking that the previous sentence appears a little incongruous in the face of the numerous recent headlines preaching the dire state of this very sector. It’s certainly true that the past 18 months or so have been some of the worst on record for the banks in terms of financial output, radical cutbacks and unprecedented redundancy drives. However, all of these initiatives were implemented in reaction to predictions of a much deeper long-lasting recession – a prediction, I might add, that was never truly fulfilled. In fact, while 2009 pales in comparison to the heady heights of 2007, it has been an exceptional year in its bounce back from the sharp talons of recession, and has presented the banks with a huge opportunity to hire.

Along with the infamous collapse of various banking institutions, there has also been a substantial amount of expansion. We saw Santander (with its investments mostly in Latin America as opposed to North America) buying up the competition; then there was Barclays Capital, using the general lack of bonuses at rival banks to poach top employees. The huge profits posted by the major players during 2009 will dramatically increase the need to recruit over 2010. This is the culmination of various factors, including the huge redundancies announced by many firms followed by their subsequent boost in profits and need to take on more staff. This, combined with the current and predicted bonus payments, will lead to the obligatory game of musical chairs.

The obvious next questions are what positions are becoming available – and where?

Perhaps the best place to start would be with Nomura where, for the first time in its history, it has made more money from its international operations than its domestic business. As Nomura intends to expand its oil and gas operations, accountants with exposure to financial analysis and accounting in this area should be welcomed with open arms. Despite RBS’s ill-timed purchase of ABN Amro, it is actively looking to expand its markets business, and subsequently will need analysts and financially astute staff to support the sales force and traders. Similarly, Morgan Stanley wants to replace the 400 staff it cut or lost during the financial crisis with those who’ll have specific focus on middle office to help the trading floor. Citigroup is looking to replace staff across the board, after having lost as many as 40% of employees in some business lines. Interestingly, many of Citigroup’s lost employees were senior, and there is therefore a clear opportunity for fast progression of junior staff.

The mass recruitment drive will not just be for those already with experience in banking, as Credit Suisse, Morgan Stanley and Barclays have all confirmed they will hire more graduates in 2010 than they did last year. Barclays even envisages as much as a 30% annual increase in graduate opportunities.

So, what ever people say about prospects for the banking sector, take it from me – there are plenty of opportunities. It’s just knowing where to look and how to press the employer’s ‘hot buttons’, in both the application process and during the interview.
 

Josh McDonald, WH Marks Sattin

A future in the Public Sector?

It is safe to say, without raising too many eyebrows, that 2009 was not the most prosperous of years in terms of recruitment. However, in spite of the recession, working in the Public Sector seems to have taken on a new lease of life – and the early indications are that 2010 will be a far better, if not a ‘bumper’, year.

The Office for National Statistics (ONS) claims that public sector workers earn 7% more than their peers working in the private sector. Maybe it’s reasonable to assume that there might be other significant benefits working in the public sector. Despite the economy in disarray with numbers of vacancies distinctly lower, the shrewd candidate can turn that to his or her advantage.

Increasingly, people with a commercial background are looking for a new direction and, similarly, public sector line managers are favouring candidates with extensive commercial experience. As recruitment consultants, we are certainly seeing more and more candidates who are looking to join an industry that is selfless, yet rewarding. Despite the worrying plight that we find the economy to be in, candidates who posses strong, ‘in demand’ skills are experiencing first-hand the benefits that the public sector has to offer.

The ONS expects average annual earnings within the public sector to have hit £22,405 in 2009, compared to the average commercial worker reaching £20,988 – although we should be aware that this statistic is not specific to the finance sector.

However, the public sector has long been seen to offer other benefits, such as improved working conditions – an average working week of 35 hours is not uncommon – and the ability to take up a pension at the tender age of 58. For those with an altruistic streak, the most significant factor when working in the public sector is the ability to ‘give something back’; doing good for both oneself and others.

So what of the future of the public sector?

The public sector is arguably 12-18 months behind the curve compared to organisations within the industry. It is widely accepted that 2010 will be a tough year, particularly with a general election looming and a change of government a distinct possibility. In fact, it is almost certain that public deficit will be reduced with the help from cuts in public sector services, and this will have an inevitable impact on jobs. However, to reiterate an earlier point, those with strong experience and marketable skills will still be of interest to the public sector – perhaps more so now than ever.

Regardless of the political hue of any new government, we will see significant changes in the public sector. My prediction is that the next five to ten years will be more rewarding than ever for finance professionals in the public sector – particularly those who will take change by the scruff of the neck.


Nick Ross currently recruits finance and accountancy professionals across the Public Sector at WH Marks Sattin. For more information about joining an industry that is ultimately selfless yet rewarding, then contact anyone on the Public Sector team at WH Marks Sattin.

So, you want to work for a ‘Superbrand’

Companies that carry the titles Big 4, blue chip, FTSE or more recently ‘Superbrand’; aren’t these just different words for the same thing?

And how are such labels acquired? Scale? Delivery? World domination? Or is it just simply a measurement of annual turnover and profit?

The exact criteria remain a bit of an enigma. The Business Superbrands survey defines a ‘Superbrand’ as follows:

“A Business Superbrand has established the finest reputation in its field. It offers customers significant emotional and/or tangible advantages over its competitors, which customers want and recognise.”

With the ranking of PricewaterhouseCoopers (PwC) as one of 2010’s top ten Business Superbrands last month (in addition to its Big 4 status), what does it actually mean to work for such a company?

The most obvious (but still valid) answer is the weight it adds to your CV. Prestigious companies attract fierce competition, so if you manage to get offered a job, you’re likely to be the top of the candidate pack.

However, don’t miss out on smaller businesses just because they don’t pack the same ‘celebrity’ punch. There are plenty of opportunities at smaller accountancy firms and SMEs. You’re likely to encounter a greater variety of work and the opportunity to get to know people rather than masses of faceless names and email addresses.

Equally, you can dip a toe into other facets of business by working as an accountant for a company rather than a practice. Read about more career options on the GAAPweb blog.

Whether or not you decide to actively pursue a career with a prestigious company, you should always keep your options open. After all, a ‘Superbrand’ organisation is only as good as its employees.

Not in control: The commercial world and the NIC increase

It’s official: Britain is now out of the recession. We’re all celebrating, right? Surely life can go back to how it was a couple of years ago. Jobs will be plentiful, businesses will suddenly turn from loss-making to profit-generating, and bankers can get their bonuses in peace without the rest of the country interfering.

You might have noticed that the above isn’t happening. Yes, the economy grew that vital 0.3%, but businesses are still suffering losses. There are far fewer jobs then there were three years ago, with more graduates searching and more qualified people with nowhere to go. And if the tabloids are anything to go by, we all still perturbed that bankers are getting their bonuses.

I could write a dissertation on the above with twenty pages of footnotes, but rather than covering old ground, I thought I’d take a look at an issue that has not got quite as much attention as it might have done if there hadn’t been quite so many changes to Income Tax: The National Insurance Contribution (NIC) increase from 2011.

In the Pre-Budget report it was announced that NIC contributions would increase by 0.5% from 2011. Since then, this has increased by a further 0.5%. The effects of this increase are that employees will now be paying 12% on main rates and employers will now be paying 13.8%.

This means that employees will be taking home a lower net pay, and employers will have a larger monthly payroll expense. According to the Treasury, this will raise an extra £5.1 billion to go towards deflating national debt.

The Chancellor has indicated certain concessions to counteract the negative impact that the increase will have. It has been suggested that no one earning less then £20,000 per annum will be worse off from NIC in 2011/12. This means increasing the rates bands and the primary threshold (currently at £844 per week) by £570 per week. Whether this will head off early complaints that once again lower income earners will take the fall that greeted the abolition of the 10% Income Tax band is yet to be seen.

The questions that are raised by the increase are as follows:

1. Is there any way for employees to protect themselves against the NIC increase?
2. How has the increase been viewed in the commercial world?
3. What other options could have been adopted?

Anyone who in 2009/10 earned £95 per week, or £4,940 per annum will suffer NIC on their wage (i.e. you only paid NIC once you earned £95 in a week). The first item of significance here is that unlike income tax, NIC is calculated on weekly earnings and therefore even if you are under the annual threshold, you may end up paying NIC if in any one week you earn above £95 (£97 from April 2010 onwards). The second is that the NIC threshold is significantly lower then the Income Tax threshold. There have been plans to align NIC with Income Tax but these were disturbed with the abolition of the 10% starting Income Tax rate band.

As mentioned, the Chancellor has hinted at his intention to align the Upper Earnings Limit for NICs with the Higher Rate Threshold for Income Tax – we can but wait. So for those of you earning above £20,000 per annum there is a way to protect yourself. For any employee who receives a pension contribution it is possible for both the employee and employer to reduce their liability.

Whilst employee contributions to pensions are subject to both theirs and their employers’ NICs, employer’s pension contributions are not. One way to counteract the NIC rise is for the employee to forgo part of their salary and in return the employer increases their pension contribution by the amount of salary relinquished. This will save NIC for both employee and employer. The obvious downside is that a lower amount of actual cash will be taken home every month, which for many is a big issue. Of course, the other issue is that if your employer does not contribute towards a pension for you, you’re pretty stuffed. However, you may wish to take this opportunity of highlighting the advantages to your employer of them contributing to a pension.

So how has the NIC increase been viewed by the commercial world? Most commercial players have realised that in these times we need to curb public spending and at the same time reduce some of the country’s debt. This is by no means an easy feat, and most agree taxes will have to be raised. However, was raising NIC the best way to do this?

One of the biggest pressures for businesses currently is cash flow. Whether it is decreased sales, uncertainty of bank lending or harsher credit periods from suppliers, cash is in shorter supply then before. Increasing NIC means that their monthly cash expense increases, putting even more pressure cash flow. The effects are fewer staff being taken on, job cuts and the inability to pay debts. In my humble opinion this is not the best way to help the economy to recover! The British Chamber of Commerce (BCC) has also said as much.

The biggest issue for the economy is the effect it will have on job creation. Ashley Almanza, Finance Director of BG, suggested as much, adding, “…the cost competitiveness of the UK will suffer as a result of the rising total tax rate.” Equally, increasing NIC may scare away foreign business. If having a factory here means going along with Corporation Tax, VAT, and a business has a high payroll, companies could look to open up branches in other countries and this could have a very negative effect on the economy.

The question remains: are there any other options open to the Treasury? They have already increased Income Tax by more then they originally planned, and although it is still possible to raise more monies here, it is unlikely to occur with an election looming. Any significant increases on Corporation Tax would cause similar problems to those mentioned above. That leaves a VAT increase, which is what the BCC suggested. In fact, according to the BCC, just a 1% rise in VAT will raise £4.5 billion.

Arguments for raising VAT rather then NIC in my opinion are thus: Our VAT rate is currently much lower then most of Europe’s and therefore will not have such a negative effect from a national point of view. The other is perhaps a bit more controversial. NIC and VAT are two very different types of tax: one is on a purchase and the other is on earnings. I can understand that the government wants to ensure the economy continues to grow, but surely it’s about time that those of us earning were cut a bit of slack and given a chance to have a bit of money to play with – and dare I say it – even save some. It seems fairer that those who are willing to spend their money suffer the tax on it.

In my view there are no advantages to increasing NIC; it will slow job creation and growth. In the long run it is likely to have a negative effect on the nation’s current deficit. Businesses and middle income earners need a break and a chance to recover. If the Chancellor is brave, he will listen to the commercial world and back down. We can but hope.



Kim Grossman attended the University of Birmingham and graduated with a 2:1 LLB with Honours. She then completed the LPC at the College of Law, before working as a paralegal for nine months.

She currently works for Landau Morley LLP Chartered Accountants and Tax Advisers. She is part-qualified with the ICAEW and will take her three finals this summer.