Under the current proposal, National Insurance is set to rise by 1.25 percent next year for both employees and their bosses. National Insurance is paid by those of working age, who are under 66 years old, and their payments give them entitlement to certain benefits and the new state pension. The tax hike has received criticism from some quarters due to it being a payment made by younger people, while retirees are not having to make the same contribution despite being more likely to receive social care.
“This is just robbing young Peter to pay for older and wealthier Paul.
“There is absolutely a case for protecting pensioners in poverty, but this policy is aimed at benefiting wealthier pensioners.
“A clear and obvious way to pay for this would be through inheritance tax, but that’s toxic for the baby boomer generation and with income tax too politically sensitive the government was left with no option but to levy the burden on young and hard working families.”
For those concerned about the proposed tax hike, Mr Lovatt has advice on how they can stop future tax rises from affecting their pocket book.
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“The message from all of this is very clear: vote,” he explained.
“Baby boomers and the elderly turnout in elections, younger voters tend not to.
“Should we therefore be surprised that the Government panders to the needs of the elderly at the expense of the young?”
According to the Institute of Fiscal Studies (IFS), a National Insurance increase of 1.25 percent would raise £14billion a year for the social care sector.
In reaction to the Government’s announcement, IFS Director Paul Johnson explained who would be footing the bill for this tax hike.
Mr Johnson said: “The extension of this levy to those over state pension age and to dividends is welcome, but this remains a tax which will be overwhelmingly borne by workers with very little coming from pensioners.
“This continues a trend seen over many decades of the burden of tax being shifted towards earnings. The creation of an entirely new tax will mean yet more quite unnecessary complexity.
“Both spending and tax will ratchet upwards over the next few years. Taxes will reach their highest sustained level in the UK.
“This was always going to be an inevitable consequence of ever growing demands on health and social care, and would have happened eventually irrespective of the pandemic.”
Despite his support of social care funding, Mr Johnson outlined why he believes other measures could have been taken.
“It is disappointing that the government did not find a better package of tax measures to fund these spending increases,” he explained.
“A simple increase in income tax would have been preferable.
“Overall much needed reforms to social care are being introduced and unavoidable pressures on the NHS are being funded through a broad based and broadly progressive tax increase.
“That is better than doing nothing.”
The 1.25 percent increase to National Insurance payments is set to be introduced later next year.
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