National Insurance hike 'will punish Britons' and 'increase generational inequality'

National Insurance ‘will not be increased’ says Kwarteng

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A report carried out by the London School of Economics (LSE) found that the proposed hike will create further inequality between millennials and baby boomers.

In July 2021, Government ministers reportedly began ramping up proposals to increase NI by one percent for both employers and employees in order to fund the social care reforms.

Upon taking on the role of Prime Minister, Boris Johnson promised to address the social care crisis impacting the country.

Specifically, Mr Johnson hopes to raise £10billion more per year in order to save the UK’s social care sector.

However, the plan has received backlash from many financial experts and institutions, as well as MPs from the Prime Minister’s own party.

The LSE report emphasises that the Government’s proposition would discriminate against millennials from less well-off backgrounds and benefit baby boomers.

Millennials are classified as anyone born between 1981 and 1994/96.

Baby boomers are classified as anyone born between 1946 and 1964.

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National Insurance: Woman in stress

National Insurance: A report from LSE criticises the proposed NI hike (Image: GETTY)

It states: “Our social care system is in crisis – vulnerable people are being left without food for days at a time, and around 1.5 million older people are not receiving the care they need.

“The government wants to raise £10billion more per year to improve our shockingly poor social care system. They are absolutely right to do so. But the current plan to increase national insurance rates to pay for it is precisely the wrong way to raise the cash.

“It will punish the young and, specifically, those who did not have the good sense to be born with rich parents.”

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Specifically, the report advocates for a system that raises income tax for the over 40s, citing it as being much fairer to both the young and those on lower incomes.

Jeevun Sandhar, the report’s author, explains why the Government’s plan is more harmful than helpful.

Mr Sandhar said: “The government is planning a National Insurance rise to fund an overhaul of social care. This is the wrong way to do it.

“Increasing taxes on the hard-working young, rather than the wealthy old, will further penalise this less lucky half.

National Insurance: Friends meeting up

National Insurance: LSE suggests the NI hike will hurt younger workers (Image: GETTY)

“It will particularly penalise young people without rich parents – the more income and wealth that older generations can gain today, the more some parents will have to pass on to their lucky children who did nothing to earn it.”

The LSE report highlights that it is unfair to tax younger workers as they are more likely to be forking out more cash towards rent, which older generations benefit from.

While rent prices rose and house prices during the pandemic, the average earnings of young people did not grow, according to the report.

In the 20 years leading up to lockdown, house prices rose by around 110 percent while average earnings by only 20 percent in real terms.

Mr Sandhar’s report advocates for a raise in taxes, however he believes older generations should be the one to pay up as they have benefitted from a more generous housing market and job prospects.

National Insurance is paid by the working age population, with pensioners and landlords not being subject to it.

Money raised from paying National Insurance goes towards pensions and benefits.

If a person is 16 or over and are either an employee earning above £184 a week, or self-employed and making a profit of £6,515 or more a year, they will need to pay NI.

Once taxpayers reach the state pension age, they are no longer obligated to pay for National Insurance.

Harry Byrne

Harry Byrne

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