National Insurance Rise: Rishi Sunak urged the hike to be lifted as the hike puts Britain on the brink | Politics | news


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Starting next spring, the social security tax will be increased by 1.25 percentage points to cover the costs of the NHS backlog and the social crisis. The increase was approved and voted by MPs last month, breaking a manifesto commitment the Tories signed in the last election.

The increase is set to go into effect in April 2022, but there are fears that the tax hike will adversely affect the UK’s economic recovery.

Social security is paid for by both workers and businesses, and the Institute of Directors (IoD) fears that one in three businesses will be prevented from expanding because of the added cost of the tax.

A total of 31 percent of the more than 600 IoD members said they expected the higher levy to result in fewer employees in their companies.

Commenting on the results, IoD Chief Economist Kitty Ussher said, “This study is a strong warning to the government of the impact that social security rate increases are likely to have on jobs.

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“If, as planned, three out of ten companies decide to hire fewer employees as a result of this tax change, the effects will be felt across the economy just as the vacation regime ends.

“Since the March budget, when the Chancellor announced a future corporate income tax hike, the economic recovery has brought in more taxes than expected.

“Instead of increasing the cost of hiring employees through higher social security contributions from employers, it should seek to support companies that are currently suffering from a skills shortage.”

The UK’s economic recovery has stalled over the past few weeks. Figures released yesterday by the Office for National Statistics (ONS) suggest that GDP rose 0.4 percent between July and August.

The economy is only 0.8 percent smaller than before the pandemic, but the growth rate was lower than originally expected.

The ONS revised its estimate for July downwards to a decline of 0.1 percent from the previously reported expansion of 0.1 percent.

It was the first monthly contraction since January when Britain was thrown into a third lockdown.

Growth recovered strongly in the second quarter, with GDP growing 5.5 percent, but has since been sluggish as supply chain problems and the truck driver crisis slowed the economy.

The increase in National Insurance was passed by the House of Commons with 317 votes to 248.

However, although they were largely backed by Tory MPs, many at the time were concerned about the potential impact of the increase.

With the economic recovery stalling, some are calling for the hike to be canceled.

Former Cabinet Secretary Sir John Redwood said: “The latest figures show that the economy is being held back by higher taxes and the threat of interest rate hikes.

“The government should stop increasing national insurance.

“More growth is needed to reduce the deficit.

“We’re still not back to pre-Covid levels.”

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