This regressive National Insurance hike will hurt those most in need

This spring may bring warmer weather but colder homes across our country as we all struggle with the rising cost of fuel. Though we can’t reduce the demand in German flats and Chinese factories that has sent prices soaring, we can think about where the rest of our pay goes to help people keep control of their lives.

For the past two years this has felt too much like a dream. Locked away with few chances to enjoy the company of friends and family, many of us have been able to save, but others have struggled. Work has dried up and bills have come in. Now those bills are rising, and not in isolation.

This April, another burden will hit working families – National Insurance rises. NI has always been misnamed. It’s not insurance, it’s another tax on income and employment. It’s a way of taking money from today’s taxpayers to pay for today’s needs. There is no savings pot that can rise or fall with investments.

This rise will be no different. It means shaving existing pay packets to fund a social care programme to be rolled out next year. But it won’t apply to everyone. Although the Institute for Fiscal Studies said that half of all those born in the prosperous 1980s will inherit more than £136,000, those born earlier, and those in tougher towns, will inherit less. That matters, because this time NI is an insurance policy, just not the one we think.

In two months’ time the Government will start collecting a premium of 2.5 per cent on salaries, that will protect inheritances over £86,000. Analysis from the Resolution Foundation think tank shows that a typical 25-year-old today will pay an extra £12,600 over their working lives from the employee part of the tax rise alone. How much their boss will hold back to pay the employer’s half is hard to say.

For many that will be insurance to cover the risk of losing around £50,000, for others, the same premium will cover sums many times that. But for many parts of our country, places where homes are less valuable and inheritance values lower, this premium is insuring much less.

It’s true many taxes provide for things some of us will never use but from which we all benefit. The NHS protects our friends and families, and even if we are personally yet to take advantage of it, just by keeping our community healthy and strong it protects us, too. This is different. When the pressure on households has rarely been higher, and with inflation eating away at savings, I can think of many better priorities than ensuring the wealthiest pass on their assets.

Let’s be clear: this isn’t just about a per cent here or a pound there, this is about the lives of our friends, our neighbours and us, ourselves. Poverty – even small squeezes on home finances – can put pressure on relationships and test families. The real-world consequences are lasting and immensely damaging.

The Government has already recognised this. Its own assessment says the policy is likely to have an “impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduced”.

When that assessment was written, in December 2021, inflation was running at 5.4 per cent and energy bills were kept artificially low by the price cap. This week, the Bank of England raised rates again and predicted inflation would hit 7.25 per cent, while energy prices will be shooting up.

That’s why I’m a believer in low taxes. Not as an ideology but because it recognises that personal and financial freedom are intrinsically linked. The job of politicians should not be to take control, but give it back so that people can decide for themselves. Economic freedom is fundamental to personal freedom and we should remove as little as possible of either to keep a community strong.

I didn’t vote for this tax rise because I couldn’t see it helping our whole community. I see the bills coming in at a time that few can afford. Though some in towns such as Tonbridge, Kent, may benefit, younger people across the country, and particularly in places like Tyneside and Glasgow, would lose out for years.

This isn’t about competition between young and old or north and south, it’s about fair taxes to share the cost of our community life together.

Over the past five years we’ve seen the price of division and the strength of cohesion. Society has split over a vote and come together over a virus. As we look to the future, we need policies that encourage opportunity and employment. That means freeing people to direct their efforts, and assets, where they think best.

We need to remember that the state has a role – vaccines proved that – but it isn’t the only solution. It may not even be the best. Private contracts, signed in coffee shops in London 300 years ago, changed the way we travel and trade. They proved free trade is based on shared risk and managed it by calculating the insurance needed to underwrite the danger. In doing so, they created pools of capital that fuelled an economic revolution.

So, what about the inheritance insurance we’re being taxed for today? Well, for those who want it, there is a free market in ideas from think tanks and economists out there, and as we learned from Lloyd’s of London, some of them could change the world.

The planned tax rise is a false economy that offers little security to younger, poorer workers

The job of politicians should not be to take control, but to give it back, so that people can decide for themselves