07-05-2025
Forget ‘two-tier tax' – the UK's India trade deal is a massive win
One benefit of Donald Trump ripping up agreements and driving a dagger into the world's trading system is that it has highlighted the benefits of free trade. Deals are getting done.
The latest pact secured by the UK is with India, a truly enormous market, and one with huge potential for those able to access it.
Talks had previously been stuck in quicksand, dragging on for three years. The rope that has pulled them out of the swamp? You could easily slap on a 'Made in Trump Towers' sticker.
One of the key parts of the deal exempts workers on short-term visas from national insurance. They will only pay that in their home country; the reverse applies to UK workers in India. It is already being called a 'two-tier' arrangement that is more punitive for domestic taxpayers. Cue outrage, and claims that British workers are being 'sold out' because companies will supposedly be able to hire cheaper Indian staff in preference to the home-grown alternative.
First off, take note of the word 'temporary'. This is a short term arrangement that applies for between one and three years. So, it will mostly cover people on secondment, not those coming over to fill posts over the longer term.
Employers will still have to secure a visa, and that isn't easy. Ask them about dealing with the Home Office and they'll happily bang on for hours about the problems this causes them. There is still the points-based immigration system to satisfy, covering skills, ability to speak English and, crucially, annual income. The minimum is, in most cases, just under £39,000 per year, but there are also provisions based on the 'going rate' for a job. If that is, say, £45,000, then the worker being offered £39,000 won't qualify. If cheaper UK workers are available, the same rule applies.
A similar NI concession already operates in a slew of existing trade deals the UK has signed with other countries. So this is nothing new and the fuss, designed to plug in to existing anxieties about immigration, is entirely confected.
Even were that not the case, it bears repeating that deals require compromises and give on both sides. You don't get everything you want. But you could argue that the national insurance concession is not actually a negative anyway. It could serve as a hidden benefit if it helps employers to attract highly skilled workers in sectors where there are very obvious, and costly, shortages the domestic workforce is not able to fill. Tech would be a good example.
The row is so patently fact free and ridiculous that it makes my head ache, particularly when one considers the overall benefits that could accrue from the deal.
India is not an open market by global standards. This lifts barriers and represents a huge win when one considers that sheer size of the Indian market and the opportunities it presents. Just consider the explosive growth of the middle class there, its vast disposable income, and the opportunities improving access to it will offer UK companies.
The government has estimated that bilateral trade will be boosted by £25.5bn with a badly needed net £4.8bn added annually to a UK economy that needs all the help it can get. It covers high end cars, booze, logistics, tech. The reduced tariffs on Indian goods coming into the UK should also lead to cheaper prices for consumers here.
Set against this, the best its opponents can come up with is a fact-lite fuss about national insurance? This is what you get when the national conversation is dominated by noisy talking heads addicted to the social media outrage machine.
Ultimately, free trade has been proven to be of benefit for those who practice it. The impact does need to be managed, and the UK has not always been good at that, which might partly explain why we are where we are.
However, a cursory glance at the damage done by exiting the world's largest free trade zone – the EU and its single market – shows just how much damage turning one's back on it can do.
It should be noted that while the agreement with India greatly eclipses the size of previous deals done with, say, Australia or New Zealand, and the numbers are big in terms of the sterling value, it is still projected to boost GDP by just 0.1 per cent. That is a tiny fraction of what the UK has lost through Brexit, which some estimates have put at as much as 4 per cent.
Free trade is ultimately far superior to the protectionist alternative. But it appears that the case for it needs to be made again. The UK government should do that, forcefully.
