The Government has done a terrific job of supporting households and business during the Covid crisis, with innovative solutions such as the furlough scheme and bounce-back loans.
Which makes it all the more surprising and disappointing that it seems poised to undo much of its good work by pressing stubbornly ahead with a 1.25 per cent hike in national insurance at precisely the wrong moment.
If it is brought in as planned this April it will take effect in precisely the same month that the energy price cap expires, triggering a rise in fuel bills of up to 50 per cent. It’s no exaggeration to say we are in an economic perfect storm.
Inflation – already at a 30-year high – is likely to rise to six or even seven per cent as a result of the spiralling cost of domestic fuel and this will create a cost-of-living crisis that will have devastating effects on millions.
Mortgage repayments are increasing too as the Bank of England raises interest rates in a bid to – ironically – curb inflation.
These increases affect everyone, but they hit working people – those who will be affected by the NI rise – hardest.
Even those who kept their jobs last year saw their incomes reduced under furlough.
These are anxious times, and the repercussions will continue for months, if not years, to come. Is this really the time to hit people with yet another rise?
An NI hike will leave employees hundreds of pounds out of pocket, with some families facing painful choices: food or heating, new shoes for the children or fix the car? The last thing they, or the economy, needs is another financial blow.
I understand that the Government will need to find the money to cover the booming cost of running the NHS, and the social care funding problem also needs to be addressed.
But these issues have confronted us for decades and will take years to resolve.
With the economy in such a fragile state, now is not the time to solve them with what amounts to a tax on jobs. It is morally wrong and makes no economic sense.
Not only will it undermine recovery, I fear it could easily tip us into recession, since the blow will fall on both employers and employees, hitting small businesses – the lifeblood of the British economy – particularly hard. And you don’t have to take my word for it.
The highly respected Centre for Economics and Business Research estimates that a typical small business with 50 employees could end up paying an extra £10,000 to £20,000 annually, potentially deterring them from taking on new staff.
Nationally, this would amount to the loss of hundreds of thousands of potential jobs, while people in work face pay freezes which, with inflation, amount to pay cuts.