Increasing National Insurance payments for millions already struggling to cope with the cost of living crisis is both fair and equitable, the health secretary has said.
Sajid Javid said the additional 1.25 percentage point levy, due from Wednesday, was needed to pay for post-pandemic health and social care.
The government has pushed ahead with plans to raise National Insurance contributions for workers and businesses, despite calls from business groups, unions and some Tory MPs to at least delay the introduction. A planned change to completely free some of the country’s lowest earners from National Insurance contributions is not expected to be implemented until the summer.
Defending the hike, Javid told Sky News the impact of the Covid-19 pandemic had been unprecedented. He added: “When we spend money on public services, whether it’s the NHS or something else, for that matter, the money can only come from two sources. 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.”
Critics have accused the government of placing a disproportionate burden on low-income people by choosing to levy a regressive tax.
“It’s the wrong tax at the wrong time and people are really, really struggling to pay their bills. And it’s just going to have a very, very hard impact on them,” said Labor leader Keir Starmer.
Starmer told BBC Radio 5 Live that the government had chosen to place the burden on those in employment, while protecting those who earned income from property rentals and shared in dividends.
“There are a lot of landlords who have a lot of properties and they won’t pay a penny more in taxes. Their tenants, who go to work, will pay more taxes.
Instead, Starmer said “the general approach should be that incomes in all their forms are taxed fairly” and promised to lay out Labour’s plan ahead of the next general election, which is due to be held in around two years.
Ministers have also increased the tax payable on stock dividends by the same proportion, although this is expected to hit small businesses and sole traders the hardest, without substantially affecting large stock traders.