It was reported last month that ministers saw an increase in National Insurance contributions as a potential route to raising funds following economic turmoil from the pandemic. Fears of this were sparked during a press conference where Prime Minister Boris Johnson refused to rule out rises in income tax or National Insurance bills. This is despite the Conservative Party manifesto in 2019 promising an increase would not happen.
Torsten Bell, chief executive of the Resolution Foundation, argued that tax rises will be needed, but added that an increase in National Insurance contributions would be unfair.
He said that this would leave those hardest hit by the pandemic to pay for the economic impact.
Mr Bell said: “Tax rises will be needed to deliver decent social care, but a National Insurance rise is a terrible way to raise the funds required. It’s a tax disproportionately loaded on to younger and lower-paid workers, compared to a fairer rise in income tax.
“Why we would target a tax rise on the groups who have been hardest hit by the economic impact of this pandemic, while exempting older and wealthy individuals, is completely beyond me.”
His comments came after former Health Secretary Jeremy Hunt backed an income tax rise.
Mr Hunt claimed a one percent rise would generate £6billion in income that would help tackle catastrophic hospital backlogs and other healthcare needs.
Whitehall sources suggested ministers were leaning towards a National Insurance rise, but this would break the Conservative’s “triple tax lock” manifesto promise.
Mr Hunt added: “The attraction of a health and social care levy is it would fund the NHS backlog in the short term and desperately needed improvements in the social care system in the medium-longer term.
“It would also be transparent about the need for resources and capacity in both sectors.
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“A health and care premium is the most honest solution, with a sensible debate on whether we’ll fund the new dementia drugs on the way, make our cancer survival rates as good as Denmark/Australia – and proper social care – and how much that’s about funding [versus] innovation/efficiency.”
The idea of a National Insurance increase was met with backlash from Conservative MPs, however.
The Guardian reported last month that Mr Johnson may rethink the policy as even members of his Cabinet expressed doubts over the measure.
At least five Cabinet Ministers were said to be opposed to plans for a one percent increase, with one telling the newspaper: “The Treasury was trying to push the PM in a particular direction, and he’s put his foot down.”
Concerns over intergenerational fairness were also raised in debate surrounding the pension triple-lock recently.
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The state pension increases each year in line with the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5 percent, whichever is highest.
However, with earnings predicted to rise by a margin of eight percent, due partly to the pandemic, concerns have been raised that younger people will be paying more to wealthier pensioners, despite the fact younger people will have been impacted by the pandemic.
Pension expert Steve Cameron told Express.co.uk last month Mr Sunak will probably have to at least partially break his 2019 manifesto pledge to maintain the triple lock.
He said: “The Conservatives vowed to keep the triple lock in 2019, but quite clearly at that point we were about to have a pandemic. The world has changed.
“When something significant changes, I’m not suggesting you should give up manifesto pledges without serious thought, but sometimes for fairness you might need to make changes.
“I would be surprised if Rishi isn’t at least considering changes.”