NI hike to wipe out minimum wage increase
Rising National Insurance contributions will see those on minimum wage hit by a £72-a-year cut just after a wage rise, the SNP has said.
The SNP said the sum may be considered “loose change” by the Chancellor, but that it may make the difference between “heating and eating”.
The figures used by the SNP show that once National Insurance contributions rise in April, people working full time on the national minimum wage – set to rise to £9.50 an hour for those aged 23 and over – will earn £72 per year less than if the tax stayed at the same rate.
However, with the rise in minimum wage, also from April, individuals are likely to earn almost £20 per week more even with the tax rise.
Spending power is also likely to be affected by rocketing energy bills and wider inflation, with research from the New Economics Foundation showing the poorest fifth of households would still be £380 a year worse off despite changes to Universal Credit, compared with keeping the £20 uplift removed this month.
SNP MSP and the convenor of Holyrood’s finance committee, Kenneth Gibson, said the Budget did “very little for the majority” and claimed the Conservatives could not fight for those on the lowest incomes.
He said: “Behind the smoke and mirrors of the Chancellor’s Budget, the recovery from the pandemic will be built on the backs of those on the lowest incomes. He is giving with one hand and taking with the other. [A total of ] £72 might be loose change to the millionaire Chancellor, but for some people it can make the difference between heating and eating.
“Increasing National Insurance is a tax on the poorest meaning that even with increases to the minimum wage, thousands of hardworking families will lose out.
“The Budget did very little for the majority, with slim pickings for those on the lowest incomes.” Meanwhile, Prime Minister Boris Johnson has insisted that inflation is likely to subside once short-term supply chain problems have come to an end.
Inflation is forecast to average 4 per cent over the course of next year, wiping out the effect of higher wages and leaving the average household no better off than they are now.