Liam Halligan: Will Boris Jonhson’s tax rise kill the recovery?
'In a huge political gamble, Johnson is raising employee NICS by 1.25 percentage points from next April'
Yesterday, the House of Commons voted to increase National Insurance contributions - or NICs - funnelling billions of pounds into the NHS and social care.
Boris Johnson will tell himself this is smart politics - Sir Keir Starmer was left embarrassed, with Labour voting against a tax rise, allowing the Tories to position themselves as the party of the NHS.
But, Prime Minister, is your latest move smart economics? Raising taxes by £36 billion pounds over three years will push the UK tax burden – tax as a share of GDP, or national income – to its highest level since the Second World War.
In a huge political gamble, Johnson is raising employee NICS by 1.25 percentage points from next April.
Workers earning £20,000 a year pay an extra £130 per annum. Those on £50,000 will pay £505 more.
This is the so-called Health and Social Care levy – that will also be paid by the self-employed. On top of that, there was an entirely unexpected 1.25 percentage points rise on dividends – hitting not just those with share portfolios, but the UK’s multi-million strong army of small business owners - from plumbers to hairdressers to graphic designers – those same small- and medium-sized firms that employ the majority of the British workforce, that are the engine of our growth.
This tax rise is meant to be about reforming social care. Yet the vast majority of this £36 billion pound tax grab will disappear into the bottomless pit that is the NHS, with no conditions linked to reform or tackling waste, just as our health service is hiring 42 new executives on annual salaries of up to £270,000 – money surely better spent on front-line staff.
But here’s my bigger concern.
Just as the economy is struggling to emerge from the deepest downturn in 300 years, workers, businesses, society as a whole are being hit with sky-high taxes.
Will Boris’ tax rise kill the recovery?