A poll released last week shows that two-thirds of Britons support increasing National Insurance contributions in order to pay for a long-delayed reform of social care in the UK. The survey by Ipsos Mori found that 64 percent of those polled said they would support a one percent increase in National Insurance contributions to help pay for such reforms. Meanwhile, 65 percent said they would support the same rise to reduce the NHS backlog caused by the pandemic. It comes after Ministers put forward the idea of hiking National Insurance earlier this year.
The Conservative Party pledged not to raise taxes in its 2019 manifesto, but the public spending throughout the pandemic may have caused a rethink.
Analyst at AJ Bell, Tom Selby, told Express.co.uk that the UK Government would likely avoid hiking income tax, but could try to dress up a National Insurance increase.
He said: “It would be too toxic. They have the triple tax lock as part of the 2019 manifesto, all of the noises coming out of the Treasury suggest they want to stick to that as much as possible.
“In terms of dressing it up if they were going to do one or the other, they would probably go after national insurance instead and look to label it as something different.
“In order to maintain their pledge not to hike income tax or national insurance, you could create a third way of taking money out of people’s salary.”
However, Mr Selby believes an assault on people’s incomes wouldn’t be the best way to raise funds.
He added: “Aside from popularity, targeting people’s incomes means they have less money to spend in the economy.
“If you go too hard on people’s incomes, people may spend less in shops which means businesses aren’t getting the revenue they need, and they won’t pay the taxes the Treasury needs to pay for the pandemic spending.”
Mr Selby says hiking wealth taxes – such as inheritance tax and capital gains tax – would be fairer.
But if the Chancellor does not do this, a “significant” increase in National Insurance would be likely.
He added: “The Chancellor has said he doesn’t want to go down the route of hiking wealth taxes, I suspect with something like a wealth tax anybody with money can move assets to avoid the bill.
“If you weren’t going to go down that route, you’d have to be talking about significant rises in national insurance or income tax – something that affects everybody.
“The sums of money that are involved are simply too high to raise from inheritance tax, capital gains tax or pension tax relief on their own.”
The Guardian reported three weeks ago that Prime Minister Boris Johnson was considering an increase for National Insurance contributions.
But after Tory Party backlash, he may change tack, the report said.
One Cabinet Minister said: “The Treasury was trying to push the PM in a particular direction, and he’s put his foot down.”
The business secretary, Kwasi Kwarteng, publicly played down the idea of increasing national insurance, telling Sky News last month it would be incompatible with the Tory manifesto.
He said: “That’s what it says in the manifesto, I don’t see how we could increase national insurance.
“But you know things have been very flexible over the last 18 months: we’ve lived through an unprecedented time, we’ve been spending huge amounts of money that we never thought was possible and it’s up to the chancellor and the Treasury, and the wider government, to decide a budget.”