Cost of Living: National Insurance Rise Hits Wages – Business Direct | Business


The Unite union also criticized today’s NI hike, arguing that the government should raise taxes on companies that have profited from the pandemic and soaring energy prices.

Unite General Secretary Sharon Graham said:

“Once again workers are being made to pay for the bad decisions of those in power. Workers and their families are now suffering, hit by runaway inflation. Some wonder if they can afford to heat themselves and eat.

“So why has the government gone ahead with an unnecessary increase in National Insurance? Why is it not taxing the huge profits racked up by pandemic profiteers and money-laden energy producers? The Unite commission on profiteering will shine the spotlight on those who really should be targeted by the Treasury.


Liberal Democrat leader Sir Ed Davey criticized the current rise in the NI – saying there are fairer ways to raise money for the NHS:

He told BBC Breakfast that:

“It doesn’t tax the unearned income of very wealthy people. It does not tax the income of owners. This puts the whole burden on the workers – it is wrong.

“Yes, we need more money for the NHS and social services. The Tories starved him of money and one of the reasons the pandemic was so difficult was that the Tories had underfunded the NHS.

At Hello BrittanyDavey argued that it’s “simply the wrong time” to raise taxes, given the inflationary pressure on households.

He points out that the Liberal Democrats argued for a 1p increase in income tax in the last election in 2019, to provide more funds for the NHS.


The Health Secretary has defended the decision to increase National Insurance for millions of workers, saying it is ‘fair that we pay for what we are going to use as a country’.

Sajid Javid told Sky News:

“It comes into force today, the new health and social protection tax. All funds raised in this way will go towards the additional £39billion we will spend over the next three years on health and social services.

“It will pay off in the NHS for levels of activity which are around 130% of those before the pandemic, there will be nine million additional scans, tests and procedures, which means people will be seen Much sooner.

“Why is all this necessary, whether for health or social services? This is because of the impact of the pandemic. We know this is unprecedented. This has been the greatest challenge of our life. The impact of this will continue for many years.

Javid says raising taxes on workers and businesses is right – because the money to fund public services either comes from taxation or from borrowing. He argues that high earners will pay the most (because they earn more).

You collect it directly for people today, i.e. through taxes, or you borrow it, which you basically ask the next generation to pay.

“I think it’s fair that we pay for what we’re going to use as a country, but we do it fairly. This levy, the way it’s increased, is that the top 15% will pay almost 50%. I think that’s the right way to go.”


Introduction: Millions of workers and businesses affected by National Insurance hikes from today

Hello and welcome to our live coverage of business, economics and financial markets.

Financial pressures on many UK households and businesses have intensified today as National Insurance rates are raised to raise funds for the NHS and social services.

Despite the cost of living crisis, the government continued with its 1.25 percentage point hike in National Insurance, announced last September.

The move means millions of workers will start paying higher national insurance contributions from today, the start of the new fiscal year.

Companies will also see their contributions increase, at a time when they are already juggling rising costs. Dividend income tax rates also increase by 1.25 percentage points.

Business groups, unions and some Tory MPs had all pushed the government to delay the increase, given the financial pressures on workers and businesses.

The Health and Social Care Levy is set to raise around £12billion a year, to tackle the backlog of NHS cases due to the pandemic, and also reform routine services.

Today’s changes mean those earning over £9,880 will now be liable for 13.25% NI contributions, up from 12% previously. Income over £50,270 will be charged at a rate of 3.25%, down from 2% previously.

But from July National Insurance will only start being charged on earnings over £12,570, because Chancellor Rishi Sunak announced a £3,000 increase in the NI threshold in the statement last spring. This will take around two million workers out of direct tax in total (if they earn less than £12,570 a year).

According to Resolution Foundationanyone earning less than £32,000 a year will be better off under the combination of these two policies from July.

Changes to UK National Insurance Photography: Resolution Foundation

But other changes come into effect for the new tax year, including a freeze on income tax thresholds. This will cause more people to pay taxes, or more taxes, if their salary increases over the next few years.

This will make it harder for households to manage rising costs, such as the spike in energy bills last week.

Prime Minister Boris Johnson defended National Insurance increases, saying the health service needs more resources:

We need to be there for our NHS in the same way it is there for us. Covid has led to the longest waiting lists we’ve ever seen, so we’ll be providing millions more tests, checks and operations as part of the biggest catch-up program in NHS history.

We know it won’t be a quick fix and we know we can’t fix waiting lists without fixing social care. Our reforms will end once and for all the cruel lottery of spiraling and unpredictable care costs and bring the NHS and social care closer together. The tax is the necessary, fair and responsible next step, providing our health and care system with the long-term funding it needs as we recover from the pandemic.

The government says the levy means:

  • From today the Health and Social Care Levy will start raising billions to tackle Covid backlogs and reform routine services
  • £39billion over the next three years will put health and care services on a sustainable footing
  • Levy will deliver the biggest catch-up program in NHS history and end spiraling social care costs


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