Rishi Sunak insists UK will not return to austerity
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The Prime Minister favours a one percent rise in National Insurance tax, while the Treasury is pushing for a higher rate of up to 1.25 percent, in a bid to increase funding for the National Health Service (NHS). The rise of National Insurance tax would affect approximately 25 million people of working age and promises to cap individual costs for healthcare between £60,000 and £80,000 during a person’s lifetime.
The UK government has been mulling over changes to taxation since Covid plunged Britain into its biggest economic recession since records began, as GDP fell by 20.4 percent.
In 2020, the Treasury approved an additional £31.9billion to support the NHS through Covid on top of the Department for Social Care’s annual budget of £148billion.
The extra government spending on Covid is broadly equivalent to the total annual spending on all outpatient, diagnostic, accident and emergency, critical care, and mental health services combined.
Spending on PPE alone is similar to the total annual spend on general practice, accident and emergency, and ambulance services combined, according to Nuffield Trust, and spending on Test and Trace is similar to the total cost of all GP prescribing.
In fact, the total lifetime cost of Covid is estimated at £271billion, roughly £9,700 per household.
Although the Conservative manifesto promised to leave income tax as it is, many politicians have argued that there is no question of whether tax should be increased, they say it has to be, in order to cope with the colossal financial burden of the pandemic.
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Former health secretary Jeremy Hunt backed an income tax rise, which he called a health and care premium.
He said a one percent rise would generate £6billion in revenue that would help tackle catastrophic hospital waiting lists.
He added that there was “a growing realisation that with the Covid backlog we’ll never get the NHS back on its feet without social care reform”.
Mr Hunt believes that a one percent rise “would fund the NHS backlog in the short term and desperately needed improvements in the social care system in the medium-longer term”.
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Research conducted by Tax Justice UK found that between March and June 2020 the number of Conservative voters who said they were happy to pay more tax to fund public services rose from 41 percent to 46 percent.
But whether National Insurance is the right tax to raise has been contested, because people of working age are most likely to be struggling financially due to the high cost of living in city centres and the need to care for children.
Torsten Bell, Chief Executive of the Resolution Foundation, said: “Tax rises will be needed to deliver decent social care, but a national insurance rise is a terrible way to raise the funds required.
“It’s a tax disproportionately loaded on to younger and lower-paid workers, compared to a fairer rise in income tax.
“Why we would target a tax rise on the groups who have been hardest hit by the economic impact of this pandemic while exempting older and wealthy individuals, is completely beyond me.”
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Tax Justice UK found there is significant support for taxes on wealth, with 74 percent of people wanting to see wealth taxed more, including 64 percent of Conservative voters and 88 percent of Labour voters.
Conservative support for higher corporation tax leaped from 61 percent in March to 74 percent in June 2020, and 75 percent of Conservatives supported a mansion tax on homes worth over £2 million.
Would you support a rise in corporation tax over a rise in National Insurance? Let us know your thoughts in the comments section below.
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