Boris Johnson and Rishi Sunak double down on
national insurance rise
PM and chancellor make firm commitment to increase
after reports of ‘wobbling’ on policy
PA Media
Sat 29 Jan
2022 22.33 GMT
Boris
Johnson and Rishi Sunak have doubled down on a planned tax hike to boost health
funding, after it was reported that the prime minister was “wobbling” on the
policy.
The PM is
under pressure from some Conservative MPs to scrap or at least delay the
national insurance increase to win back support as he awaits the findings of
Whitehall and police inquiries into claims of lockdown-busting parties held in
Downing Street.
But
Johnson, with the chancellor, has now made a firm commitment to go ahead with
the 1.25 percentage point increase, designed to tackle the Covid-induced NHS
backlog and reform social care.
Writing in
the Sunday Times, the pair insisted that it is right to follow through on the
“progressive” policy. “We must clear the Covid backlogs, with our plan for
health and social care – and now is the time to stick to that plan. We must go
ahead with the health and care levy. It is the right plan,” they said.
“It is
progressive, in the sense that the burden falls most on those who can most
afford it. Every single penny of that £39bn will go on these crucial objectives
– including 9m more checks, scans and operations, and 50,000 more nurses, as
well as boosting social care.”
Johnson and
Sunak said they are both “tax-cutting Conservatives”, but there is “no magic
money tree”. “We believe passionately that people are the best judges of how to
spend their own money,” they said.
“We want to
get through this Covid-driven phase, and get on with our agenda, of taking
advantage of our new post-Brexit freedoms to turn the UK into the enterprise
centre of Europe and the world. “We want lighter, better, simpler regulation,
especially in those new technologies in which the UK excels. We are also
Thatcherites, in the sense that we believe in sound money. There is no magic
money tree.”
In April,
national insurance is due to rise by 1.25 percentage points for workers and
employers. From 2023, it is due to drop back to its current rate, with a 1.25%
health and social care levy then applied to raise funds for improvements to
care services.
Political
opposition to the change has come from all sides of the Commons, as MPs fear
the impact that cost of living pressures could have on stretched household
budgets.
Inflation
is at a 30-year high after the coronavirus pandemic and the energy price cap is
due to lift in the spring, possibly increasing bills by 50%.
Middle-income earners ‘to be hit hardest’ by
national insurance rise
Workers on £30,000 to £50,000 will pay higher
percentage of salary than those on £100,000, figures reveal
Boris Johnson ‘fully committed’ to national insurance
rise
Miles
Brignall
Fri 28 Jan
2022 18.32 GMT
Earners of
£100,000 a year could end up paying proportionately less in national insurance
than those on middle incomes if a planned increase goes through in April, it
has emerged.
Figures
produced by the Tax Calculator UK website show those earning £100,000 a year
will pay just 7% of their overall salary in national insurance contributions
(NICs) – the same proportion of their income as someone on £20,000 a year.
The prime
minister and the Treasury have come under intense pressure to scrap or at least
postpone the £12bn increase in NICs – introduced to cover the shortfall in
social care funding – as the cost of living crisis continues to escalate.
While the
Treasury has repeatedly claimed the increase is “progressive”, figures
published on Friday by the online tax calculator show that workers earning
between £30,000 and £50,000 will be the hardest hit by far.
It
calculates that someone earning £50,000 a year will pay £5,086 a year in NICs
alone after April – a £505 increase – amounting to 10% of their gross salary.
While
someone earning £100,000 a year is set to pay the highest national insurance
bill – £7,008 a year (an increase of £1,130), the proportion of their pre-tax
income paid in NICs will be just 7%. Those on £30,000 a year will pay 9% of
their gross salary in NICs.
“The
increase in national insurance will have a huge effect on workers’ earnings in
2022, especially given soaring energy bills and the fact that inflation is at
its highest point in 30 years,” said a spokesperson from Tax Calculator UK.
“This data
gives us a compelling insight into the fact that lower and average earners will
be significantly more squeezed by the NICs hike than those at the very top.
“People
earning some of the highest salaries in the country are set to pay the same
percentage of their salary as a person on £20,000, despite earning five times
as much.”
From April,
NICs are set to be charged at 13.25% on most earnings up to £50,000 but at just
3.25% on income above that threshold.
The figures
will be seized upon by Labour, which has called for a fairer, more progressive
way to fund social care. The shadow chancellor, Rachel Reeves, told the BBC on
Friday morning that this was the “wrong tax at the wrong time” and described it
as a tax on “ordinary working people and on jobs”.
The
increase in NICs was announced by the chancellor, Rishi Sunak, in last autumn’s
budget and will hit wage packets on 6 April, at the same time as a four-year
freeze on income tax thresholds.
The
combination will leave the average household £600 a year worse off in 2022-23,
the equivalent of 1.4% of their disposable income, according to the Resolution
Foundation thinktank.
Business
groups are also furious at rising bills for employers. On Friday the Institute
of Directors joined calls from other business leaders to scrap the tax rise.
A Treasury
spokesperson said: “It is not true to say that high earners are least affected
by the health and social care levy. Everyone with earnings above the primary
threshold will pay a flat 1.25% on their income.
“Over half
the revenue from the health and social care levy will come from the wealthiest
15% of the population, while over 6 million people on lower incomes will be
completely exempt.”
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