Labour to test Tories with snap debate on national insurance rise

  • 3/8/2022
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Labour will spring a snap debate on cancelling the increase in national insurance contributions (NICs) on Tuesday, warning it will cost the average private sector worker £410 a year, as the opposition tries to exploit Tory divisions. In new analysis of sluggish wages and the national insurance rise, planned for April, Labour said private sector employees would face a “double whammy”, with employers also passing on the cost of their increased NICs. The rise, billed as a health and social care levy, was designed to raise £12bn to tackle the post-Covid NHS backlog, as well as funding a longer-term overhaul of social care. Critics including the Institute for Fiscal Studies and the Resolution Foundation have said the rise, set in legislation in the autumn, is disproportionately loaded on to younger and lower-paid workers compared with a rise in income tax. The vote at Labour’s opposition day debate on Tuesday is intended to expose growing Tory unease over the cost of living crisis, exacerbated by the Russian invasion of Ukraine. Among those who have called for the NICs rise to be delayed are the Cabinet Office minister Jacob Rees-Mogg, the Tory chair of the Treasury select committee, Mel Stride, the foreign affairs select committee chair, Tom Tugendhat, and the former Europe minister David Frost. The shadow chancellor, Rachel Reeves, said the UK had been “left exposed to soaring costs and spiralling inflation because of choices the Conservatives have made, and now they’re going to make the cost of living crisis worse, hitting workers with a double whammy from an unfair, terribly timed tax rise”. She added: “The Conservatives are trapping us in a high-tax, low-growth cycle. They must get behind Labour’s motion tomorrow and halt this tax rise before it’s too late. And they must look again at Labour’s proposal for a one-off windfall tax on oil and gas producers to cut household energy bills by up to £600.” The draft motion from Labour calls on the government to cancel the planned rise of 1.25 percentage points. Labour’s analysis is based on the conclusions of the Office for Budget Responsibility which found that, in addition to the NICs rise directly levied on employees, 80% of the equivalent increase in employers’ contributions would be “passed through to workers via lower nominal wages”. Tory MPs have been privately making the case to the Treasury that the economic circumstances that shaped the NICs rise announced last summer have fundamentally changed, including a bigger than expected increase in energy prices and significant inflation. In January, Rishi Sunak and Boris Johnson wrote a joint article vowing to press ahead with the rise, a sign in part that the chancellor feared the prime minister could bend to the demands of Tory MPs while his premiership was under threat over Downing Street lockdown breaches. No 10 has said there are “no plans” to delay the rise. The Treasury has been contacted for comment. A HM Treasury spokesperson said: “The chancellor has been clear he believe in lower taxes. But we took the tough but responsible decision to introduce the levy that will provide a necessary, permanent source of funding to support the NHS and fix the social care system. “The levy is fair, with those earning more paying more – and it’s right that employers, who benefit from a healthy workforce, contribute so the costs are more widely shared. “We’re providing around £21bn this financial year to help families with the cost of living, including a rise in the National Living Wage, meaning that people working full-time will see a £1,000 increase in annual earnings.”

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