Time to spike the tax hike: As the painful NI rise hits in weeks while living costs soar, MPs and business demand a delay to spare families
A hike in national insurance this April must be stopped to help families survive a cost of living crisis, MPs and business leaders insisted last night.
Amid mounting concern over soaring bills, they have joined the Mail to warn ministers that they must delay and rethink the increase – or risk piling unsustainable pressure on struggling households.
Senior Conservative MPs said the 1.25 percentage point rise was ‘too much’ and would make families poorer just as the nation was hoping for a post-Covid economic upswing.
The £12billion tax grab is due to take effect from April when families face a huge hike in energy bills and a rise in council tax.
A hike in national insurance this April must be stopped to help families survive a cost of living crisis, MPs and business leaders insisted last night. Pictured: – The Chancellor visits Stoke-on-Trent on Thursday
Inflation is already at its highest level in 30 years and many experts expect interest rates to rise significantly – adding hundreds of pounds to mortgage repayments.
The national insurance rise will cost a worker on a £30,000 salary around £255 over a year – and £505 for anyone earning £50,000.
The increase, which was announced last year, will raise around £12-13billion annually. It was originally intended to help fund health and social care, but most of the money for the first three years will go toward clearing the post-Covid NHS backlog.
Political and business opposition to the rise has been growing, with many MPs concerned that it will hit pay packets just as energy bills are expected to soar by as much as 50 per cent. It will also hamper small firms trying to recover from pandemic disruption.
At least one Cabinet minister is said to have urged Boris Johnson to abandon the move, while the PM’s former Brexit chief David Frost has warned that the Tories risk losing the next election unless they cut taxes.
Former Tory minister Sir John Redwood said: ‘They need to scrap the NI rise now. It is a clear breach of an important manifesto commitment and a tax on work. It will make the cost of living crisis worse.
‘It will also slow the economy too much. This is a wrong set of policies that they need to change urgently. We want people to become more prosperous, not the opposite.’
Craig Mackinlay, of the Net Zero Scrutiny Group of Tory MPs, said: ‘With the pressures on cost of living, potential interest rate rises, undoubted massive increases in fuel bills and other inflationary costs, now is not the time to implement a 1.25 per cent national insurance rise. It must now be delayed or rethought entirely.’
Conservative former minister David Jones warned that the hike – coupled with rising energy prices and council tax – would put ‘far too much pressure on families’.
He added: ‘Energy prices are international – there is little or nothing the Government can do to control them. But what is entirely within the Government’s own control is the tax system.
‘And given the exceptional circumstances, the Government should at least be announcing that the NI increases will not take place. They should at the very least postpone them for a year.’
Mike Cherry, national chairman of the Federation of Small Businesses, said: ‘National insurance hikes will lead to lower wages and make the cost of living crisis far worse.
‘Scrapping the tax rise would help secure the recovery and boost pay packets, helping under-pressure household budgets. We urge the Government to take stock of the significant inflationary pressures and change course.’
At least one Cabinet minister is said to have urged Boris Johnson (pictured on Tuesday) to abandon the move, while the PM’s former Brexit chief David Frost has warned that the Tories risk losing the next election unless they cut taxes
Julian Jessop, economics fellow at the Institute of Economic Affairs, said raising taxes now could be ‘the final straw that tips the economy back into recession’.
Boris Johnson and Chancellor Rishi Sunak are working on a plan to alleviate the impact of the energy bill rise, though the Mail understands that a decision is not expected for several weeks.
Yesterday Business Secretary Kwasi Kwarteng said bill payers would have to wait until the spring statement in March to find out what extra support might be available.
A string of ideas has been suggested, such as imposing a stabilisation mechanism on energy prices, extending the warm homes discount or even giving every family a one-off £500 payment to help with domestic bills.
Adam Scorer, chief executive of National Energy Action, a fuel poverty charity, said: ‘Halting the NI rise is one way to limit the damage, but it’s absolutely essential that the Government takes direct action to reduce energy costs for families on low incomes.
‘Without that we’ll see millions simply unable to afford a warm home.’
Boris Johnson and Chancellor Rishi Sunak are working on a plan to alleviate the impact of the energy bill rise, though the Mail understands that a decision is not expected for several weeks
A Government source said last night: ‘This NHS and social care levy is to ensure the NHS gets the funding it needs to clear the backlogs caused by the pandemic and to instigate long-term social care reform.’
A Downing Street spokesman added: ‘We’ve taken decisive and historic action with our health and social care levy due to raise around £13billion a year for the NHS and social care.
‘This will benefit people up and down the country, including by tackling the backlog that the pandemic has created on NHS operations and procedures, strengthening the adult social care system so that people do not have to bear the financial risks of catastrophic care costs themselves, and funding a 3 per cent pay rise for nurses.’
This tax raid will crucify families: Experts warn National Insurance rise will pile more misery on Britons already under siege from soaring bills
By Ben Wilkinson Money Mail Deputy Editor
This will add £1,000 a year to our bills
By Helena Kelly Money Mail Reporter
Suzanna Samaka and her family are a higher-income household but they are already feeling the pinch.
If the national insurance rise comes in they face paying an extra £1,000 a year.
Miss Samaka has a toddler Enya, aged two, and 16-week-old daughter Betsy with her 51-year-old partner Steve Owen.
She said: ‘Now just doesn’t feel like the right time for the Government to increase any more taxes.
‘Energy costs are rising and our food shops have become much more expensive.
‘It feels like the Government should be helping out, not adding to our bills. We have always been sensible with our money and we have savings to help us through.
‘But we’re still very worried. It’s hard to see how lower-income families will cope.’
Miss Samaka works for a bank and founded #honestyaboutediting, a campaign for more transparency around edited online content. She and her partner have a shared income of around £100,000 a year.
The national insurance rise will pile more misery on families already under siege from soaring bills, experts warned last night.
Households are being clobbered by relentless cost rises, and pensions and wages are failing to keep up with inflation.
Analysts say April’s tax grab – which will strip the average family of £600 a year – could prove too much for many.
The biggest strain on most household budgets is the energy crisis which has sent bills rocketing.
The price cap that dictates how much suppliers can charge has already risen by more than £100 but is predicted to surge by another £600 in April.
The gas price crisis has helped push inflation up to the highest level in 30 years at 5.4 per cent. But economists predict it will hit at least 6.4 per cent in April.
Analysis for the Daily Mail by the Centre for Economics and Business Research revealed on Monday that households were facing extra costs totalling £2,440 compared with before the pandemic.
But at the same time, the Chancellor’s extra national insurance burden will take more money out of employee pay packets.
The hike will mean workers pay an extra 1.25 pence in every pound over to the taxman. It will cost someone earning £30,000 around £255 a year, and a worker with an £80,000 salary £880 a year.
Labour Shadow Chancellor Rachel Reeves said: ‘Working families are already feeling the crunch. But the triple whammy of an imminent rise in the energy price cap, real wages falling and tax rises coming down the tracks are going to make this crisis even worse.’
Laura Suter, head of personal finance at AJ Bell, said: ‘While the Government wouldn’t have planned it this way, the national insurance hike now looks very poorly timed as it comes in the same month as energy bills are dramatically increased once again, on top of record-breaking inflation and rising living costs.
Its another kick after the pandemic
Ellie McCann faces paying an extra £318 a year in national insurance if the tax increase goes ahead.
The 27-year-old marketing consultant has already seen her energy costs rise by around £50 a month.
She is expecting her rent to increase soon too.
She welcomed the Daily Mail’s campaign to stop the rise going ahead.
Miss McCann, pictured, from Manchester, said: ‘An extra £300 a year is a big increase in my outgoings.
‘We’ve just come out of this horrible experience of the pandemic and just as life is starting to get back to normal it feels like another kick.
‘It’s hard to see how I can keep up with all these financial pressures.
‘With energy bills and food shops rising it doesn’t feel like the right time to be adding such a big expense to people’s bills.’
‘We’ve already seen a rise in the number of people using credit cards and other borrowing and once April hits we’ll likely see many more families already struggling, even before they’re faced with a tax rise.
‘The national insurance increase means that many people will lose hundreds of pounds from their take-home pay, which could be the straw that breaks the camel’s back for some families.’
Economists predict the Bank of England will raise the base rate further this year, hiking the cost of mortgages for millions.
A 1 per cent rise would add more than £2,000 to the annual cost of a £300,000 mortgage at the average standard variable rate of 3.74 per cent.
Meanwhile, inflation is eating away at our savings.
With the average interest rate paid on nest eggs now a pitiful 0.1 per cent, every £10,000 put away will be worth only £9,470 in real terms after a year – a loss of £530.
Wages have also failed to keep up with inflation for the first time in a year, and have now fallen in real terms by 1 per cent, figures revealed this week.
Britain’s 12million pensioners are facing cuts in real terms after the Government abandoned its triple lock promise to increase rates by the highest of either inflation, earnings or 2.5 per cent.
Analysis for the Mail shows the prices of essentials such as a food and fuel are soaring well ahead of the rate of inflation.
While the consumer prices index hit 5.4 per cent this week, the analysis by Hargreaves Lansdown found the rate for basics was 6.1 per cent.
Petrol prices have risen 28 per cent from 114.1p a litre to 145.8p in a year. Rail fares will also rise by 3.8 per cent in March, adding £114 to a £3,000 season ticket.
Sarah Coles of Hargreaves Lansdown said: ‘Rapid rises in essentials should ring alarm bells, because while we can cut back on the little luxuries in life to make ends meet, there’s far less we can do about the cost of things we can’t live without.’
ROS ALTMANN: We cannot add to the burden of workers on a knife-edge
Commentary by Ros Altmann for the Daily Mail
For the past ten years, I and so many others have been highlighting the worsening social care crisis and calling on government to ensure proper funding to resolve the biggest failure of social policy in our time.
You might think, therefore, that I, of all people, would welcome the effort to tackle this painful problem by increasing national insurance.
But you would be wrong.
Because while I applaud the Government for addressing the problem rather than continuing to sweep it under the carpet, a hike in national insurance contributions in the middle of the worst cost-of-living crisis for a generation is clearly no longer a sustainable solution.
Indeed, the timing of this could not be worse – and I wholly support the Daily Mail’s new campaign to spike the tax hike.
As we emerge from a pandemic that has hit businesses and household incomes so hard already, energy bills, food and fuel prices, and other basic essentials are soaring in cost.
How else £12bn could be raised for NHS
By Lucy White Chief City Reporter for The Daily Mail
CUT GOVERNMENT SPENDING
Last September, the Government announced the biggest departmental spending increase this century – £90billion a year after inflation by 2024-25. If that increase in spending was limited to 3.5 per cent, Matthew Lesh at the Institute of Economic Affairs, said ‘you would pay for the cost of scrapping the national insurance increase while still boosting departmental spending substantially’.
Rolling three unpopular levies – business rates, council tax and stamp duty – into one sensible ‘land value tax’ would get rid of inefficient models ‘that discourage development and are regressive in nature’, said Mr Lesh. He said it could raise additional revenue in a fairer way but the amount would depend on the design.
PURSUE COVID FRAUDSTERS
Treasury officials said they have given up hope of tracking £4.3billion of the £5.8billion which went missing through emergency schemes such as furlough, grants for the self-employed and Eat Out To Help Out. Britain’s tax collector has argued it would cost too much to pursue all of the fraudsters but campaigners say much more could be reclaimed.
LEVY ON THE SUPER-RICH
More than 100 millionaires this week called for wealth taxes on the world’s richest. A wealth tax which would start at 2 per cent for those with more than $5million (£3.7million), and scale up to 5 per cent for billionaires, could generate £43.7billion. But such a tax would have to be mirrored by countries across the world to avoid wealth leaving the UK.
Paying more tax than you have to might sound bizarre. But that is exactly what many wealthy households do in the London borough of Westminster. The City Council gave its top-rate taxpayers the chance to give extra contributions, and in two years it raised £1million.
Labour argued this month a windfall tax, which would slap levies on the ‘excess profits’ of North Sea oil companies, could raise £1.2billion for the Government’s coffers. It was rejected by most Tories.
There are precedents: Geoffrey Howe levied a £400million windfall tax on banks in 1981, and Gordon Brown boosted the Exchequer by £5.2billion when he played 16 years later, targeting private utilities.
Now is not the moment to add to the burden on hard-pressed working families who are already on a financial knife-edge.
Under the current proposal, many who are already struggling to pay their bills will, after April, suddenly find their pay packet is even smaller – while their living costs will be higher.
This is hardly ‘levelling up’.
Those on the lowest income will be hardest hit because anyone with an income over £9,564 pays NI, while only those earning over £12,570 start paying tax. But those living on large pensions or buy-to-let property income will pay nothing extra at all.
The poorest families have felt the economic strain of lockdowns most dearly. Forcing them to pay extra national insurance from April will only push them further into poverty.
But perhaps the worst part of it all is that even if we were prepared, as a society, to bear the pain of the imminent tax increase, it won’t actually alleviate the social care crisis anyway.
Because far from being ring-fenced for this ‘Cinderella’ section of the welfare state – underfunded, overworked and used as a back-stop by the NHS – the money raised from the so-called ‘health and social care levy’ will initially be used to help our National Health Service.
Over the next three years, £36billion from the 1.25 per cent tax rise will go to tackling the NHS backlog – before the money will then shift to tackling social care.
But do we believe it?
Having studied and worked on social care reform for two decades, I know as well as any that if money is earmarked for the NHS, it won’t be seeing the light of day again.
After two years of a pandemic and a waiting list of 6million and counting, the bottomless pit of the NHS will doubtless suck up these extra resources – and, once again, force the Government to find even more funding to help fix social care.
Therefore, rather than rushing ahead with a tax rise that no one wants or can afford at the moment – and that won’t actually solve the crisis – the Government should wait till the worst of the cost of living crisis has settled.
The social care can has been kicked down the road for so long now, what is the sense of ploughing ahead with wrong solutions at the wrong time just for the sake of doing something?
Things are going to get tight – and the Government needs to be radical.
In the long run, I believe that a fairer solution would be a social care insurance levy to which everyone contributes regardless of where their income comes from, so that working people are not the only ones paying.
But whatever is eventually decided, now is the moment to be brave and press pause, not to rush ahead with an ill-conceived tax that will fix nothing and be highly damaging for families and businesses at such a vulnerable moment.
We have been promised a resolution to the social care funding crisis for many years. But increasing national insurance is not the way to do it and now is definitely not the time.
Baroness Altmann is a campaigner for better elderly and social care.
Watchdog ‘must stop phone and broadband bills rising 10 per cent’
By Sean Poulter Consumer Affairs Editor for The Daily Mail
The telecoms watchdog is under pressure to step in and halt price rises of over 10 per cent for broadband and mobile phone contracts.
People could end up paying more than £100 a year extra, and BT has already announced an increase of 9.3 per cent.
Millions of people are signed up to phone, broadband and mobile contracts that allow their provider to put up prices by the rate of inflation plus a further percentage.
Virgin Media is raising mobile phone tariffs on April 1 by the retail prices index (RPI) measure of inflation, which is now 7.5 per cent, plus 3.9 per cent. That is a total of 11.4 per cent.
The figure could be even higher, because the RPI rate used for the calculation will be the figure for this month, which could be more than 7.5 per cent.
Virgin said that it was ‘reviewing our pricing to fuel further investment in our network and services’.
Lyndsey Burton, the managing director of Choose, a price comparison website, said: ‘Ofcom either needs to ban mid-contract price hikes completely or, at the very least, they must set a cap that more fairly distributes inflationary costs.’
Meanwhile, the AA has found that petrol prices fell by only half a penny at the pumps last month even though wholesale prices fell by 8p.
Petrol retailers were accused of fleecing motorists by cashing in on the Christmas getaway and failing to pass on more of the savings at the pumps. The AA said that they were making more than £11 on every £55 tank of fuel.
The cost of filling up could soon rise even further as the price of crude oil approaches $90 a barrel.