UK WBG response to calls from Cabinet to delay NIC increase
Date Posted: Tuesday 25th January 2022
Today cabinet and backbenchers have called for a delay to the implementation of the rise of National Insurance Contributions (NICs), planned for April this year.
The planned increase, announced last September as part of the Government’s Health and Social Care levy, was presented as necessary to pay for NHS and social care spending. At the time, the UK Women’s Budget Group argued that increasing NICs were not the best way to raise money, nor did the amount the levy was supposed to raise come close to what is needed to address the crisis in social care. We suggested that in the immediate term, while the UK was still managing the Covid crisis, the Government should borrow to address the backlog in the NHS and stimulate the economy through investing in social care.
WBG has long argued that a settlement to address the crises in health and social care would best be funded by Government borrowing. This would help to address both the urgency and scale of the problem. The proposal to increase NICs, although flawed, contains important recognition by the Government of the need to invest in health and social care. The calls made this week, to delay the rise in NICs, carry with them the risk that the Government will postpone its plans to increase spending on health and social care, arguing that it cannot afford to do so without the additional money from the levy. Rather than delay plans to invest, the Government should instead take this opportunity to recommit itself to funding that health and social care investment by other means. Similarly, MPs demanding the delay to the NIC hike should seek to secure that commitment from the Government.
Like several other organisations, including TUC, Tax Justice UK and Patriotic Millionaires UK WBG advocates for raising capital gains tax (CGT) rates in line with income tax rates as a fairer way to raise revenue than increasing NICs in a cost-of-living crisis, which would also be less likely to harm the recovery.
For more information about Social Care, see our most recent briefing here.
Updated 26th January 2022