Johnson and Sunak confirm the rise in National Insurance by 1.25% to clear the NHS backlog
The Prime Minister of United Kingdom (U.K.) – Boris Johnson and Chancellor to the Exchequer – Rishi Sunak have jointly given a go-ahead to the planned £ 12 billion rise in National Insurance from April 2022, to help clear the National Health Services (NHS) backlog.
Under the new plan, the employees, employers and the self-employed will all pay 1.25% more in the pound for National Insurance for a year. After that, the extra tax will be collected as a new Health and Social Care Levy.
The Government is under pressure from some Conservative MPs to scrap or atleast delay the National Insurance rise. The opposition believes that Johnson’s new plan will have a higher impact on the lower-paid employees and could contribute to inflation when household budgets are under pressure from rising energy prices and food bills.
In an exclusive interview to the Sunday Times, Johnson and Sunak said, “We must clear the Covid backlogs, with our plan for health and social care – and now is the time to stick to that plan. We must go ahead with the health and care levy. It is the right plan.”
They further said, “It is progressive, in the sense that the burden falls most on those who can most afford it. Every single penny of that £39bn will go on these crucial objectives – including 9m more checks, scans and operations, and 50,000 more nurses, as well as boosting social care.”
The new rule means an employee making £ 20,000 a year, will pay an extra £ 89 in tax. Similarly, an employee earning £ 50,000 a year, will pay £ 464 extra in tax in a year. People earning under £ 9,880 a year, or £ 823 a month, will not have to pay National Insurance and will also be exempted from new levy.
What’s worrying for U.K. is the rising inflation which is already at 30-year high at 5.4%. Businesses have warned that they may have to pass on the burden of extra tax by passing it onto the customer. Besides, the cost of Brexit is still hurting U.K. The labour shortage, delay in movement of goods across Europe has already hit the economy hard. On top of it, Coronavirus (COVID-19) made it worse for the economy to gain momentum.
The Government has said the changes, announced at last year’s Budget, are expected to raise £ 12 billion a year, which will go initially towards easing pressure on the NHS. A proportion will then be moved into social care system over the next three years as the COVID-19 backlog subsides.
The joint interview has been seen as a sign of unity between the pair, especially after widespread criticism of Johnson over claims of parties in Downing Street during lockdown. Besides, Sunak is a leading candidate to replace Johnson if he has to resign.
Meanwhile, the Government has also confirmed that the earnings threshold at which graduates in England start repaying student loans would be frozen in April 2022. The freeze, which would see a graduate earning £ 30,000 and repaying £ 113 more a year than expected, has been described as a “stealth” tax rise for those affected.
