Prime minister Boris Johnson and Chancellor Rishi Sunak insisted on Sunday (30) that their £12 billion National Insurance increase would go ahead, despite opposition from business bodies, Labour and retail trade union Usdaw.
Usdaw is urging the government to scrap its 1.25p in the pound National Insurance increase, saying the increase is “also bad for business”. Under the plans, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 for a year.
From April 2023, the extra tax will be collected as a new Health and Social Care Levy. Legislation to set it up was approved in Parliament in September.
The government says the money will initially help clear NHS backlogs, and then be moved into the social care system over the next three years.
Defending the rise in the Sunday Times, Johnson and Sunak said it was “progressive” because higher earners pay more.
They described themselves as “tax-cutting Conservatives” and “Thatcherites, in the sense that we believe in sound money”.
“There is no magic money tree,” they added.
Usdaw, however, is calling on the government to scrap the National Insurance increase, saying it is also bad for businesses and a tough burden on struggling retailers who “can ill afford a rise in their overheads”.
“A cost of living crisis looms for our members, many already struggling to make ends meet, with food and fuel prices rising, energy bills soaring and real wages falling,” Paddy Lillis – Usdaw General Secretary said.
“Added to that the government is imposing a National Insurance increase that will hit the lowest paid and is a tax on jobs. Labour was right to oppose this tax hike, it is the wrong policy at the wrong time.
“The increase is also bad for business. The retail industry has been severely impacted by Covid-19, but it was in crisis before the pandemic.
“While we desperately need a retail recovery plan from the Government, we also need them to be sensitive to the impact of their fiscal policy on business. After nearly two years of lockdowns and restrictions, many struggling retailers can ill afford a rise in their overheads.
“We hope the government is listening to the growing calls from business, trade unions and MPs across the House of Commons for the National Insurance increase to be scrapped. This Government tax rise in the midst of a cost-of-living crisis is bad for workers, businesses, consumers and families.”
There is also concern about the timing of the increase, with the cost of energy soaring and rising inflation also pushing up the cost of food and other bills.
Business groups have also warned about the effect of the rise on small companies and the wider economy.
Shadow levelling up secretary Lisa Nandy called on the government to “rethink” the planned rise, adding it would see people’s incomes “squeezed even more”.
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