National Insurance: Blackford criticises government plans
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Proposals to increase National Insurance by an expected 1.25 percent later today would result in workers and employers paying more to fund the UK’s social care system, but many think it’s unfair on younger workers who will end up forking out more for the care of older generations. It’s a contentious subject which is receiving a lot of backlash from backbenchers, not least of all because it backtracks on a Conservative promise to voters not to raise taxes at the last election. That said, the money to pay for the UK’s struggling social care system has to come from somewhere, so exactly who will pay what, if these plans get the go ahead?
How much extra National Insurance will I pay?
£30,000 – workers on this salary a year will pay around an extra £255 a year in extra tax which works out at roughly £5 a week
£50,000 – those earning this amount or more a year will be asked to contribute £500 more a year in added National Insurance which amounts to about £10 a week extra
Around one million pensioners are working, but aren’t currently paying NI, but this could change under the new rules.
Boris Johnson looks set to raise NI contributions later today (Image: Getty)
This planned increase in National Insurance is not popular among voters – a survey by investment firm AJ Bell has discovered that fewer than one in six voters (15 percent) would support increasing National Insurance rates to fund social care reforms.
It conducted an independent nationwide survey asking which of nine money raising options people would find most acceptable.
The most common answer was that no increase in taxation would be acceptable (38 percent), however failing this being an option, capital gains tax (32 percent), dividend tax (23 percent), income tax (20 percent) and inheritance tax (17 percent) were the most acceptable options.
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Yet despite its unpopularity, the Conservative Government looks likely to press ahead with this as well as scrapping the state pension triple lock in an announcement later today. Tom Selby, head of retirement policy at AJ Bell, said it’s a huge gamble that could mean the Conservatives lose favour with the younger generations.
He said: “Prime Minister Boris Johnson and Chancellor Rishi Sunak will be taking a huge gamble if they push ahead with rumoured plans to increase National Insurance rates and scrap the state pension triple-lock to fund social care reforms.
“Fewer than one-in-six (15 percent) people backed increasing NI to pay for the plans when presented with it alongside eight other money-raising options, while just eight percent supported changes to the state pension triple-lock.
A National Insurance increase is particularly unpopular with younger generations with just one in ten 18 – 44 year olds supporting a rise.
Who are the top 10 lenders? (Image: Getty)
A national insurance increase is particularly unpopular with younger generations with just one in ten 18 – 44 year olds supporting a rise.
“Both measures represent a clear breach of the Conservative manifesto and so would undoubtedly prove hugely controversial.
“Increasing capital gains tax, dividend tax and inheritance tax were all more palatable, perhaps in part because they affect fewer people.
More voters support raising income tax than National Insurance – but despite this the Government appears to have decided this is not an option it wants to pursue.
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“Perhaps tellingly, the most popular response was that no change in taxation would be acceptable, suggesting that any solution will almost certainly come at a political price,” Mr Selby explained.
“The Government will be hoping that by paying for social care reforms through a combination of a rise in National Insurance rates and ditching the triple lock – possibly temporarily – they will avoid accusations of intergenerational unfairness.
“The big political risk is that in attempting to ensure both younger and older people pay for the reforms, they will simply anger everyone.”
It’s reported that the Government will also scrap the state pension triple lock in a statement later today, another unpopular move that was backed by just eight percent of the survey’s respondents. In the past the triple lock has protected pensioners by promising that state pensions will rise in line with the level of inflation, average wages or 2.5 percent – whichever is greater.