In Defence Of Tax Cuts Just For Indians

Keir Starmer has secured a historic free trade deal with India which eliminates tariffs on 85% of British exports within the decade which would have otherwise faced an average levy of 130%. Yet despite this massive win, Conservative and Reform politicians are instead focusing on Indian visa workers not having to pay national insurance for three years. This tax cut for Indians should be welcomed, however, both as a small price to pay for the £4.8bn gains to Britons, and, as a fitting response to the fact Indian visa workers are entitled to fewer state benefits. 

Starmer’s free trade deal is to be praised. Over ten years it will eliminate 85% of Indian tariffs on British exports and reduce many of the rest. Whiskey and gin will see the tariffs they face fall from 150% to 40% and car tariffs will be reduced from 100% to 10%. Consumers are to benefit from tariffs on textiles, apparel and footwear being eliminated as well. Over the long term the British economy is expected to be £4.8bn larger than it otherwise would be. In order to achieve this free trade deal though, Jonathan Reynolds, the business secretary, had to agree that Indians on visas less than three years would be exempted from paying national insurance contributions.

In the short term this move is expected to cost the Treasury £100m. Let’s imagine that figure is underestimated fivefold in the long-term and the actual annual cost is likely to be £500m. A simple back-of-an-envelope calculation shows the free trade deal will still be to the advantage of British taxpayers, because, the UK’s tax take of 35% multiplied by the £4.8bn economic gain still yields the Treasury £1.68bn, meaning, a net gain of £1.18bn to British taxpayers. Opposing the deal on the basis Britons are being ripped off just doesn’t make sense. To not have gone ahead with this free trade deal simply because of the visa element would have been to make everyone worse off in fiscal terms. A misguided move at best. 

Despite the clear gains to be made from this free trade deal, I suspect many people will still object to the national insurance exemption for Indian visa workers on the basis it is unfair to Britons. To begin with, few people seem to object to selective tax cuts to foster economic growth elsewhere. Farmers pay less inheritance tax than everyone else, the film and gaming industry have special tax breaks, and cider has a lower rate of alcohol duty on it compared to other alcoholic drinks too. Why should a tax cut to Indian visa workers be any different? Perhaps it is because Indian visa workers will free ride on public services, i.e., be net drains on the Treasury. 

Yet the vast social democrat majority of Britons take no issue with many people, for example, the poor and pensioners being fiscal drains, so, why can’t Indians be fiscal drains as well. Maybe it’s because they are not British so don’t fall under the ambit of a nationally bound social justice, meaning, they have no warrant to be a fiscal drain, i.e., benefit from redistribution. Perhaps. Yet a sensible reaction to them having to be net or neutral contributors to the British state, and, national insurance contributions being a condition of the free trade deal, would simply be to further restrict any welfare visa workers can receive, not not sign the free trade deal. 

And to be honest, the British state is already tighter on visa workers than citizens. For example, visa workers have to pay an immigration health surcharge which amounts to £1,035 per year, a surcharge which now raises £1.7bn each year, or, just under 1% of the NHS’s budget. Moreover, most visas in the UK come with a no recourse to public funds condition which stops migrants from receiving state benefits such as universal credit or housing support. 

Free trade with India should be welcomed with open arms. The visa agreement is nothing to worry about, and, even if it were, it is a small price to pay for an agreement with the most populous country in the world. Conservatives were quite happy defending non-dom status for wealthy foreigners because it is in the national interest; their thinking should be no different in defending this tax cut for Indian visa workers to clinch a free trade deal too.

Image: Wikimedia Commons/Prime Minister's Office (India)

Licence: Government Open Data Licence (India)

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