'Nudge Unit' calls for changes to business banking

Whitehall gurus, who subtly influence the way we live, believe they know how to get the economy moving again

High street banks are to create new accounts that automatically deduct income tax as part of government attempts to "nudge" entrepreneurs into taking on staff.

It is the latest idea from the Behavioural Insight Team charged with changing the way the Government influences our lives – almost without us noticing. Talks are well advanced with at least two major bank chains about creating an "easy-PAYE" account, which could form the centrepiece of growth plans in next month's Budget.

From getting more of us to donate our organs and insulate our lofts to catching tax dodgers and illegal drivers, the team of eight policymakers in the so-called "Nudge Unit" combine economics with psychology – and a smattering of common sense – to alter subtly the way we live.

Once viewed as a "nutty indulgence" at the heart of David Cameron's government, the unit now hopes to "infect" every part of Whitehall with its radical thinking. "It is not just something that is of amusement value in laboratories in California," said a source. Toughening up the language in tax letters, for example, has dramatically increased income for HM Revenue and Customs.

David Halpern, a former policy chief for Tony Blair, heads the unit and hit the headlines last week when he suggested the elderly should be encouraged to return to work and move into smaller homes to prevent loneliness. Now he is turning his attention to stimulating growth, and how to encourage Britain's 3.6 million sole traders to start hiring by reducing the "friction costs" – or hassle, as it is better known – by involving banks.

It is understood a company would pay an employee's gross salary into one of the special bank accounts, which would then deduct income tax and national insurance before paying the net salary. A source said: "The classic Treasury view of these things is very macro; that it doesn't matter about the micro. But for many small businesses, small friction costs, in terms of time and money, are actually quite consequential."

Officials believe the measure will prove significantly more successful than George Osborne's much-hyped National Insurance holiday for new firms to hire 10 staff, which created only 1,000 jobs. The unit is also examining ways to allow firms other than banks to lend to companies as part of the Treasury's credit easing strategy. "We think there are a number of players who might not go to a conventional bank but others have already made a credit judgement about them," a source said. For example, a builder may have an account at their local supplier after making a decision about their creditworthiness.

How we are nudged

Energy A plan to get whole streets to club together to get discounts on loft insulation failed because it proved impossible to get people to talk to neighbours. Instead, loft insulation schemes are to be rebranded "loft clearance", with companies emptying attics then quietly laying some lagging.

Internet Search engines to be asked to change global default settings so UK firms can be found more easily.

Tax People who pay their tax early could be entered into a lottery, with prizes funded by fines on late-payers.

Motoring Letters accusing motorists of driving without insurance will photos of the vehicle on the road.

Organ donation Forcing online driving licence applicants to make a "required choice" about donating.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Account Manager

£30 - 38k (DOE): Guru Careers: We are seeking a digitally focussed Account Man...

Recruitment Genius: Web Developer - PHP / MySQL / HTML / CSS

£23000 - £28000 per annum: Recruitment Genius: Due to expansion, this digital ...

Recruitment Genius: Receptionist / Cashier

£16500 - £19500 per annum: Recruitment Genius: One of the South East's leading...

Recruitment Genius: Sales Administrator - Automotive

£18000 - £25000 per annum: Recruitment Genius: An exciting opportunity exists ...

Day In a Page

A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935