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Tax alarm

Concerns raised at talk of rise in NI contributions

Mike Cherry

Mike Cherry: government ‘cannot be serious’

Concerns have been raised over the prospect of an increase in employer national insurance contributions.

The UK government is considering the idea to tackle the social care crisis.

Ministers appear to be backing away from a new tax on all over-40s, including pensioners, in favour of increasing NI, a move which has enjoyed greater public support in the past.

The issue has caused a clash between Boris Johnson and Chancellor Rishi Sunak, but the pair are said to be close to an agreement.

The plan was due to be announced this week but with key Cabinet members, including Mr Johnson and Mr Sunak now isolating, it is likely to be delayed, possibly until the autumn.

Critics have pounced on the plan for being unfair on the young.

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Torsten Bell, the Resolution Foundation’s chief executive, said: “It’s a tax disproportionately loaded on to younger and lower-paid workers, compared to a fairer rise in income tax.”

Paul Johnson, head of the Institute for Fiscal Studies, said: “Funding social care just from national insurance would be very inequitable.

“It would be a continuation of a long-term policy of hitting those of working age while protecting pensioners even for something designed to benefit people well over pension age. It’s a question of fairness.”

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Federation of Small Businesses national chairman Mike Cherry questioned the timing of the move.

“After the huge amount of damage wrought to businesses over the last 16 months, the Government cannot be serious about a strong economic recovery if it thinks hiking the jobs tax is a good idea,” he said.

“It is astonishing that just 24 hours after many businesses were able to re-open, ministers think now is a good time to land small firms with this bombshell.

“Employers are weighing up decisions as we speak about who they can afford to keep on in the long term as the job retention scheme winds down – the last thing the Government should be doing is increasing the risk of an unemployment spike. 

“Jobs don’t create themselves. The more that the Government chooses to put up the costs of employment, the fewer jobs there’ll be for young workers who have been hit so hard by the pandemic.

“This Government promised to be a champion of the small business community and ruled out NICs increases in its manifesto. To go back on that promise would shatter trust among the small firms and sole traders on which our recovery will depend.   

“NICs essentially serve as a jobs tax, making it harder for firms to create opportunities. To hike them as the furlough scheme and wider support measures end would stop our economic recovery in its tracks before it’s even started. 

“A lot of business owners have had the worst 16 months of their professional lives – many are now struggling with staff being pinged, emergency loans and late payments. 

“Against that backdrop, the Government should be doing all it can to clear the way for them to hire, invest and grow. Instead, we hear it’s considering doing the opposite. It should urgently clarify matters and recommit to its manifesto pledges.”

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