Sajid Javid grilled on Universal Credit and National Insurance
Prime Minister Boris Johnson confirmed his plan earlier this week to break a Conservative manifesto pledge. From April next year, National Insurance contributions will rise from 12 percent to 13.25 percent, as part of Government plans to reform the health and social care system. MPs voted last night to support the plan by a majority of 319 votes to 248.
Boris has faced hefty criticism, including from some Conservative backbenchers, that the plan will be unfair on younger people and the lower paid.
The increase means someone earning £20,000 a year will be forced to cough up an additional £130 to the taxman, while another earning £80,000 will pay £880 extra.
People earning less than £9,564 do not have to pay National Insurance and will not have to under the new plans.
As the UK bounces back from the ongoing coronavirus pandemic, with buzzing music festivals and football stadiums packed to the rafters, the Prime Minister was warned not to raise taxes before his announcement this week.
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Boris Johnson was warned tax rises could ‘choke off’ recovery from the coronavirus pandemic.
How National Insurance works.
The UK will now have the highest tax levels since wartime.
Johnny Leavesley is chairman of the Midlands Industrial Council, one of the Conservative Party’s biggest donor groups.
He told the Telegraph in July that a tax hike, whether that be income tax, National Insurance or corporation tax, could stifle the economic recovery.
He said: “Rishi Sunak has been the perfect Chancellor for the pandemic, generously supporting what has been necessary to keep the economy alive, but now he needs to embrace Thatcherite principles by limiting state spending and cutting taxes to stimulate economic growth.”
MPs voted on the plans yesterday.
He urged Mr Sunak to also raise the threshold of National Insurance Contributions to “help the lower waged” and to ditch the planned increase in corporation tax.
Mr Leavesley warned: “Business outside the leisure sector have shown strong performance during the pandemic.
“As the lockdown continues to ease, the leisure sector will also bounce back.
“We need economic recovery and business growth to pay for state debt and spending.
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“We are already highly taxed and tax rises this autumn will choke off a recovery when we need it most.”
A leading economic forecaster said at the end of July that the British economy is growing at its fastest pace since World War Two and could return to pre-pandemic levels by the end of the year.
EY Item Club expected GDP to grow by 7.6 percent, having shrunk by 9.8 percent last year.
All sectors of the economy witnessed expansion in the second quarter of 2021, as seen with the 4.8 percent growth the UK economy recorded.
The Conservative Party pledged not to raise taxes in their 2019 manifesto.
Another party donor, Alexander Termerko, who has given the Tories around £700,000, said: “It is a mistake to raise taxes.
“As a party donor and activist, increases in taxes undermine our party manifesto, which stresses the importance of fiscal responsibility and reduction of taxes.”
He warned business will find it harder to compete internationally as a result, and the rise will “squander lots of benefits we received following Brexit”.
Amid criticism from his own backbenchers, critics have argued that Boris risks losing the support of Conservative voters.
One Tory MP, who wished to remain anonymous, told the Telegraph that he had gone home and cried to his partner in recent months over some of the decisions he had voted on, saying that he “did not know what a Tory was anymore”.
The average worker will lose £255 annually to fund the health and social care reforms in England.
A fourth Tory donor said before the plans were confirmed: “Boris is increasingly alienating supporters. There are just a series of increasingly nonsensical policies, the net zero thing is utter lunacy, everyone knows it.
“It is just childish fantasy, posturing.
“He is to the Left of David Cameron. And David Cameron almost split the Conservative Party.”