Boris Johnson and Rushi Sunak have pledged to go ahead with the upcoming 1.25% rise in national insurance for employees and employers from April, saying it is a progressive tax
In an article in the Sunday Times, the PM and the Chancellor said that the tax rise is essential as it will provide critical funding to address the NHS backlog.
‘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 both stressed that they were in favour of a low tax environment but the pandemic has resulted in a number of tax rises, including the freezing of thresholds for annual allowances until 2026, which will drag more taxpayers into the higher rate of tax.
When the national insurance rise was first announced last September, the majority of Conservative MPs voted for the measure, and did not express any reservations.
Now a number of senior MPs have come out strongly against the rise which will hit employees and employers from April. There is growing concern that the rise, coupled with soaring prices, the energy crisis and high inflation, will hit most households and could stall post-covid recovery.
Business groups including the CBI and Federation of Small Businesses are also concerned that the rises will have a negative impact on business growth.
Federation of Small Businesses chair Mike Cherry said: ‘Rises in employers’ National Insurance will mean some employers having to reduce roles or hours, or curtailing pay rises for many workers, as the Office for Budget Responsibility’s (OBR) analysis shows. This is unfair and the government should change course.’
A CBI spokesperson said: ‘If the government goes ahead as planned then it is incumbent on them to use the March Budget to bring forward more ambitious plans to raise the longer term growth potential of the economy.’