The proposals announced by the UK government today will see national insurance contributions for employers and employees rise by 1.25% each.
It is proposed that the revenue from these changes will provide a short-term funding boost for the NHS and a longer-term funding commitment to social care.
Commenting on these policy developments, NERI Co-director Paul Mac Flynn noted that
“Among high income European economies, the UK collects the least amount of revenue from its population. It is clear that in order to fund adequate public services, the amount of revenue collected within the UK would have to increase.
It is also true that this deficit in revenue is larger for social contributions like national insurance than it is for other forms of taxation. However, the gap in revenue collected from national insurance is much larger for employers than it is for employees and this should have been reflected in today’s announcement.”
NERI Senior Economist Dr Lisa Wilson added
“The burden of today’s policy announcements will fall on households predominantly that rely solely on work for their household income. Other forms of income, such as capital gains tax continue to receive much more generous treatment in our tax system, and this cannot be justified any longer.
It is also clear that increasing employee national insurance contributions will take much more from lower income households which have already been hit with cuts to Universal Credit”.