The Tory tax hike
It was a victory for the Chancellor Rishi Sunak, “and for common sense”, said The Times. After days of lobbying by right-wing Tory MPs and of wavering by the Prime Minister, Boris Johnson and Sunak jointly confirmed that the Government’s proposed hike to national insurance payments will go ahead as planned in April. The policy has long met with fierce opposition in the Conservative ranks. It also clearly worried Johnson, who had been toying with the idea of scrapping it to shore up his “embattled leadership”. But the 1.25 percentage point tax rise for employees, which will be matched by employers, has been earmarked to pay to clear the backlog in NHS operations, and in future to meet “the huge cost” of social care for Britain’s ageing population. The levy was the Government’s single most important piece of domestic reform last year – arguably, in fact, the only “significant” one. Without the £12bn it is set to raise, its plans would be unworkable.
There are far better ways of raising money than this “un-Tory” act of “self-harm”, said Reaction. It goes against a direct manifesto pledge in 2019 not to raise NI, and if people understood it properly, they’d be even more furious. The “unalarming” figure of 1.25 relates only to the rate of increased taxation in each pound. “In real terms, most people’s NI contributions will increase by a punitive 10%.” The plan’s “a political shocker”, said Polly Toynbee in The Guardian. It will seize £255 a year from typical earnings, just as fuel bills, council tax and inflation are all also rocketing. And the depressing fact is that “virtually none” of this tax grab will reach social care, but will instead be soaked up by the “six-million-long NHS waiting list”. Even the Government’s promise to cap care costs at £86,000 will play out unfairly, meaning that those with relatively modest assets could lose them all, while those with much larger estates will be protected. Around 17.4% of “working households” are already officially in poverty, said Elliot Chappell on LabourList. Inflation is at a “near 30-year high” of over 5%. The better-off can survive by cutting down on luxuries. For families with little disposable income, price jumps on essentials like food and fuel will spell disaster.
Yet what else can the Government do, asked Jeremy Warner in The Daily Telegraph. The economics are clear. No one likes tax rises – but the pandemic increased the national debt by a quarter. And if you want a large state – as this Government seems to – you have to pay for it. “Raising the tax burden to a 70-year high” is the result. The next few months will be “scary”, said Hamish McRae in The Independent, but there is a flicker of light at the end of the tunnel. A strong job market and good business profits mean the Government has borrowed £13bn less than expected in the financial year to date. We should be a “little comforted” that “so far, at least, the economy is growing fast”.