On Wednesday the Government announced plans to increase National Insurance contributions for those in work. The money is certainly needed, even before the pandemic the Government had cut public spending to levels not seen since before the existence the NHS and modern welfare state. The fact that throughout this period they cut taxes for those on the highest incomes certainly goes to just how little tackling public sector debt was their real priority.
Unfortunately, of the options for funding public services, National Insurance is a poor choice. While people like the idea that money raised through National Insurance has to go towards funding the NHS and benefits, the reality is these areas are subsidised so much from income tax the Government could both cut NHS funding and increase National Insurance without breaking any rules.
National Insurance hits those on the lowest incomes the hardest, particularly those in a generation already struggling with insecure work, unable to afford house prices, and with little chance of ever getting to retire. This is far from a new approach for this Government, with services once paid for by income tax increasingly transferred to taxes targeting low earners.
In contrast, by using income tax so that high earners cover a fairer proportion of the costs, the Government could ensure that the greatest burden fell upon those with the broadest shoulders. It would also enable all income to be taken into account, rather than prioritising some types over others.
In addition, National Insurance increases the cost for companies to create new jobs, making it harder to get people back into work. Before the pandemic Crawley was the densest centre of employment in the country outside of London and we have taken the biggest economic hit as a result of COVID, leaving many desperate for new work. The fact that it is coming at the same time as the Government are gearing up to take £1,000 from 11,440 Crawley families reliant upon Universal Credit while letting high earners avoid paying their fair share of the tax bill really does go to show what this Government’s priorities are.