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National Insurance payments

Volume 711: debated on Wednesday 30 March 2022

The petition of residents of the constituency of Glasgow East,

Notes that Her Majesty’s Government proposes a rise in national insurance payments for all to offset costs related to reforms of health and social care policy in England; and declares that these measures will be deeply regressive to low income and young earners.

The petitioners therefore request that the House of Commons urge the Government to abandon proposals to raise national insurance payments with immediate effect.

And the petitioners remain, etc.—[Presented by David Linden, Official Report, 28 February 2022; Vol. 709, c. 875.]

[P002713]

Petitions in the same terms were presented by the hon. Member for Leeds East Richard Burgon:.

Observations from The Financial Secretary to the Treasury (Lucy Frazer):

It is right that health and social care has a new, completely dedicated, and sustainable source of revenue not just today but into the future as well. Every penny collected from the health and social care levy goes direct to the NHS and social care. The Government are committed to responsible management of the public finances. That is why the Government have taken the tough, but responsible decision to increase taxes. Funding is required now to reduce the covid backlog.

The levy is progressive. Over half of the levy revenue comes from just the highest 15% of earners, so a reversal would not significantly benefit lowest and middle earners. To help ensure fairness and parity, the Government will extend the levy to those working over state pension age from April 2023. The rates of dividend tax will also increase by 1.25 per cent from April 2022 ensuring that business owners and investors will be making a contribution in line with that made by employees and the self-employed on their earnings.

Further, at Spring Statement 2022, the Government announced that the national insurance primary threshold and lower profits limit—the point at which employees and self-employed respectively start paying national insurance contributions (NICs)—will increase to £12,570 from July 2022.

This is a tax cut worth over £330 for a typical employee in the year from July; the equivalent saving for a typical self-employed person would be worth over £250. Around 70% of workers who pay NICs will pay less NICs, even accounting for the introduction of the levy. An additional 2.2 million people will be taken out of paying class 1 and class 4 NICs and the health and social care levy entirely, on top of the 6.1 million people who already do not pay these NICs.

This measure is in addition to the PT-LPL increase introduced by the Government in April 2020 that increased the point at which employees and the self-employed start paying the main rate of national insurance contributions, by over £850 to £9,500. The Government have also increased the income tax personal allowance by over 40 per cent in real terms since 2010, ensuring some of the lowest earners do not pay income tax (22-23).

Specifically on the issue of a wealth tax, the UK does not have a wealth tax, but it does have several different taxes on assets and wealth. The UK taxes assets and wealth across many different transactions, including the acquisition, holding, transfer and the disposal of asset, as well as taxing the income derived from holding assets. Notably, the Wealth Tax Commission which has no connection or link to the Government, found in 2020 that if considering inheritance tax, capital gains tax, stamp duty and stamp duty land tax, the UK is among the top of the G7 countries for wealth taxes as a percentage of wealth.