YOUNG FACE TAX CRUNCH
NATIONAL INSURANCE INCREASE TO PAY FOR SOCIAL CARE REFORM CONDEMNED
NEW plans to overhaul adult social care are likely to be funded by a tax rise which will hit younger workers hardest – despite a warning from within government that it would be ‘morally, economically and politically wrong’.
Prime minister Boris Johnson is set to announce a rise in National Insurance contributions of at least one per cent to fund the long-awaited shake-up of support for elderly and disabled people.
But ex-Conservative chancellor Lord Hammond said: ‘An increase in National Insurance contributions is asking young working people – some of whom will never inherit property – to subsidise older people who’ve accumulated wealth during their lifetime and have a property. On any basis, that has got to be wrong.’
A one per cent rise from next April would mean a 29-year-old on an average salary of £29,536 would pay £200 more a year – but a 66-year-old earning £50,000 would pay nothing extra.
Unlike income tax, NI contributions
are not charged on money made from other sources such as savings, pensions or property. People also stop paying it once they reach state pension age – even if they are still employed.
One unnamed cabinet minister told The Sunday Telegraph: ‘If you get all your income from investments and property you don’t pay a penny but if you work your guts out for minimum wage you get clobbered. It would be morally, economically and politically wrong.’
Cabinet members are said to still be wrangling over details, with tension reported between Mr Johnson and chancellor Rishi Sunak amid rumours of a cabinet reshuffle this Thursday.
Mr Sunak is said to be demanding the £10billion raised would also help pay the cost of clearing the NHS backlog due to Covid. Critics pointed out the rise in NI would break the Tories’ 2019 election promise not to raise taxes.
Labour leader Sir Keir Starmer said last night an NI increase would ‘ hit young people, businesses and low earners’. And shadow foreign secretary Lisa Nandy said it would ‘load the entirety of the cost of social care on to supermarket workers, delivery drivers already suffering high childcare costs, high housing costs and who kept us going through the pandemic’.
Charity Age UK says successive governments have failed those in need of social care, with 1.5million now not getting the support they need. Vaccines minister Nadhim Zahawi refused to deny the reports telling the BBC: ‘We’ll bring forward our proposals and I’m very happy to come back on your show when the details are published.’ The change is one of a range of post-pandemic measures critics say may make millions worse off. The temporary £20-a-week top up to universal credit is set to be axed, cutting income by more than £1,000 a year for six million people. Research by charity Action for Children found when the cut is compared to 2010 benefits for sole-earner couples with two children, some families will be up to £2,000 worse off.
There are also reports the government may break another election promise by abandoning its ‘triple lock’ on pensions. It guarantees they will rise by whichever is highest – inflation, earnings or 2.5 per cent.
But that could mean pensions rising eight per cent next year if wages rise sharply amid job market disruption.