National Insurance: Low income Britons to get just 76p more a month with Liz Truss as PM
Liz Truss outlines Conservative leadership pledges
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Ms Truss has plans to reverse the recent hike in National Insurance contributions in an emergency budget in September. Analysis by the Tony Blair Institute for Global Change (TBI) suggests that if Ms Truss becomes prime minister, the same tax cut would leave the richest households in the UK better off by £93 a month.
She told the Financial Times that she would look to ease the cost of living pressure by “lowering the tax burden”.
According to TBI, reversing the National Insurance increase would offset a very large chunk of the October price shock for the wealthiest households but would do very little for the worst off.
The National Insurance increase was part of the government’s plan to fund the NHS and social care.
Since April 6, workers and employers have been paying an extra 1.25p in the pound for National Insurance.
From April 2023, the Government says National Insurance will return to its old rate and the extra 1.25p in the pound will be collected as a new Health and Social Care Levy.
This levy – unlike National Insurance – will also be paid by people over the state pension age who are still working.
As the cost of living crisis continues, and energy bills soar, Ms Truss pledged to scrap the 1.25 percent National Insurance rise to try and ease some pressure if she is elected.
However, households with children and those who are out of work are most vulnerable to the inflation shock that’s still to come.
Inflation has been rising rapidly over the last 12 months, in June 2021 inflation was recorded as being at 2.5 percent.
Since then, the level of inflation has risen by seven percent to 9.4 percent in July of this year.
Prices are now rising far more quickly than wages and Britons may feel the squeeze even more with inflation forecast to hit 11 percent in October when another energy price hike kicks in.
According to an analysis of official Office National Statistics (ONS) figures by personal finance expert at Money.co.uk James Andrews, the rising inflation has caused a person’s average monthly spending to be an estimated £196 more compared to last year.
The energy price cap was expected to reach £2,800 in October but Cornwall Insights now expects it to exceed £3,500 before rising to £4,260 in January and £4,420 in April.
Ian Mulheirn, Executive Director and Chief Economist at the TBI said: “I think that for most households this is an emergency.”
Chancellor of the Exchequer, Nadhim Zahawi said: “Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.
“We’ve introduced £37billion worth of help for households, including at least £1,200 for eight million of the most vulnerable families and lifting over two million more of the lowest paid out of paying personal tax.”
The £37billion support package is aimed to help households who are struggling the most.
Millions will get £1,200 this year to help them with rising costs.
This includes a £650 payment, a £400 grant to help with energy bills, and a £150 Council Tax rebate for the 80 percent of households in bands A to D.
In addition to this, nearly one in 10 people will get a £150 disability payment this autumn.
Over eight million pensioner households could also receive an extra £300 through their Winter Fuel Payments in November and December.
Mr Zahawi continued: “I know that people are finding things difficult with rising prices and increasing pressure on household budgets.
“That’s why we’re taking action to control inflation and providing immediate help for households. It’s so important that over seven million vulnerable households have received £326 direct payments so far.
“There is also more help to come, with eight million of the most vulnerable households receiving £1,200 of direct support to help with bills over the winter.”
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