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Taxing issues

The biggest tax rises for several generations, certainly since the beginning of the 1950s were announced in Parliament yesterday, and are being debated today.
Why? To try and plug the hole in the funding for both the NHS and the UK’s social care bill. Unfortunately, it has to be done. We cannot afford to continue to fund our social services and health services the way we currently are. An ageing population, an ageing population that is living longer but with more complex health needs as a result – needs funding and doing so was never going to be an easy fix.
We could spend the next 100 years debating whether the announced rise in National Insurance rates, for both employees and employers, is the right way to do it, or whether going after the big, bad corporate tax-avoider wolves like Amazon, Facebook and whoever else, would have yielded better results (Probably not. You can avoid paying anything you like if you know the right accountant). There are so many areas where government money has been spent that, perhaps, could be rechannelled into social care or the NHS, but it would still be a drop in the proverbial ocean.
I have no idea what the ideal solution is, nor even, a solution that’s less than ideal but workable. The thing about increases in NI is that it is, like VAT, one of those insidious taxes that you don’t really notice until you wonder why you’ve got a bit less in the bank at the beginning of this month than you did last month. It is a tax based on one’s income so it is, therefore, income tax, but the idea is that it can be raised without the pearl-clutching amongst the Tory faithful that a headline % Income Tax rise would immediately generate. At least, I assume that is the theory that Johnson is clinging to. There is a theory that the British people see a rise in NI contributions as OK, because they view it almost as a savings plan, into which they pay so that they may draw down when they need medical or welfare care. Which, of course, it isn’t. It’s an income tax with an upper limit, that’s all.
Yes, to raise it goes against the manifesto but then most governments in my life time have done stuff that was either not in or specifically excluded from their election promises (Sir Nick Clegg: I’m looking at you). I don’t remember Johnson promising to prorogue Parliament if he didn’t get his way when he was trying to get elected. But he did it.
I haven’t had time to go through all the details, many of which are still to emerge in the fine print over the next weeks and months. I do know that, if it goes through, this will hurt a great many people who have already struggled to get through the past 18 months as it is. Businesses too. There are great many companies out there who have struggled to get through the pandemic, are struggling to recover from it and, with the end of the furlough scheme on the horizon, are struggling to see how they can rebuild themselves for the future.
We knew we were going to have to pay for all the furlough schemes and the Covid loans and everything at some point. What’s scary is that this current rise isn’t even about that. There will be more to come for a very, very long time. My children and probably their children will be carrying this burden.
Oh and, if I’ve done my maths right, if National Insurance is rising from 12% to 13.25% it is not rising by 1.25%, rather, it is going up by 1.25 percentage points. The rise in percentage terms is just over 10%. It is a 10% tax hike. Pearl-clutchers get ready.

Just a thought…..

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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