UK-India Trade Deal: A Boon for British Businesses or a Blow to Domestic Workers?
A multibillion-pound free trade agreement between the UK and India has been hailed as a significant Brexit benefit, promising cheaper clothes and shoes for British shoppers, a huge market for Scotch whisky producers and luxury carmakers, and billions of pounds worth of extra trade. However, the deal has been marred by controversy over national insurance contributions (NICs), with critics claiming that it will “sell out” British workers.
The agreement, finalised this week, includes a concession that exempts Indian workers seconded to the UK on short-term visas from paying NICs for up to three years. They will make social security payments in India instead, and the reverse applies to British workers in India. This move has been seized on by senior Tories, including Kemi Badenoch, who described it as “two-tier taxes”, and Nigel Farage, who claimed that Keir Starmer had “sold out British workers to the highest degree”.
According to a government source, the NICs concession is expected to cost the exchequer about £100m in lost revenue. However, Business Secretary Jonathan Reynolds told broadcasters that this was “less than a tenth” of the £1bn in additional tax revenue the deal is expected to bring, and that it would affect about 20,000 Indian workers currently in the UK. As The Guardian reports, Reynolds’ assertion that the deal will bring significant economic benefits to the UK is supported by the fact that the agreement is expected to increase trade between the two nations.
Farage has claimed that half a million Indians arrived in the UK over the past two years and that “this deal will throw the doors open even wider” and make it cheaper to hire Indian workers over British ones. However, this claim is misleading, as most Indians applying for jobs based in the UK will not benefit at all. In fact, the deal does not include substantial numbers of extra visas for Indian workers, a key ask by Delhi in its trade negotiations. Labour has claimed that the Conservatives put visas on the table during their talks and that the current government secured a deal without changing its immigration policy.
The UK already has reciprocal tax agreements with more than 50 countries, including the US, Canada, and Japan. India has existing social security agreements with several European countries, such as Germany, France, and the Netherlands. A senior Indian official told the Financial Times that the Tory leader was talking “rubbish” as she had agreed with the principle of exempting temporary Indian employees from NICs.
The issue was also on the table during the talks under the Conservatives while Badenoch was trade secretary. As The Guardian notes, the fact that Rachel Reeves raised national insurance contributions for employers in her budget, a tax rise that only kicked in last month, means the wider context for it is particularly damaging.
Major service industries, including the financial and legal sectors, are not included in the deal, which has drawn criticism. In parallel with the trade deal, negotiators have been trying to strike a bilateral investment treaty with India, which would benefit the City of London. Rishi Sunak came close to finalising an agreement while he was prime minister last spring but wanted more for the services sector, which accounts for 80% of the economy.
The deal will reduce UK import taxes on some Indian agricultural products, including frozen prawns. This has raised alarm about the implications for British farming. Officials have said the deal will benefit farmers by lifting India’s tariffs on British food exports, including lamb. Meanwhile, the UK is keeping tariffs in place on some agricultural products such as milled rice, where Indian exports could be damaging to British producers.
As The Guardian reports, the NICs issue was one of the longest-running sticking points in the trade talks and emerged as the final hurdle last week before negotiators agreed the deal. This demonstrates that it is a significant concession and one the government dug its heels in over.
In conclusion, the UK-India trade deal has been hailed as a significant economic benefit for the UK, but it has also been marred by controversy over national insurance contributions and immigration. While the deal promises to increase trade between the two nations, critics claim that it will “sell out” British workers. As the government continues to negotiate trade deals post-Brexit, it remains to be seen how this agreement will impact the UK economy and domestic workers.
Source: The Guardian – Has the UK-India trade deal sold out British workers, as Farage and Badenoch claim?
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