Lancashire business group blasts 'health levy' national insurance rise

The Lancashire-based Federation of Small Businesses has hit out at the Government’s plan to raise money to fund the NHS and social care.

By Tim Gavell
Thursday, 9th September 2021, 12:30 pm

The group said the plan for a 1.25 per cent increase in National Insurance Contributions for employers, employees and sole traders alongside a 1.25 per cent increase in dividend taxation, was an anti-jobs tax which would come at exactly the wrong time as businesses recover from the effects of the pandemic.

FSB national chairman Mike Cherry said: “These hikes will have business owners and sole traders feeling demoralised at the point when they’re trying to recover from the most difficult 18 months of their professional lives. For those thinking about starting up, they send completely the wrong message.

“Business owners who have done all they can to retain and support their staff during the pandemic are now being punished for that loyalty with an £11bn increase in NICs, which essentially serve as a jobs tax."

FSB's Mike Cherry

He said the so-called “Health and Social Care Levy” would stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead.

He added: “At the same time those running companies, many of whom were left out of pandemic support measures, face a fresh assault on dividend revenue.

“It’s extremely disappointing to see the Government undermining the good work it did last year in raising the Employment Allowance to provide some protection for small employers.

“Instead of breaking manifesto promises, we had hoped this administration – which has repeatedly pledged its support for small enterprises – would build on that progress against a backdrop of spiralling input prices, skills shortages, supply chain disruption, the reintroduction of business rates and emergency loan repayments.

“This move marks an anti-jobs, anti-small business, anti-start up manifesto breach. The Government should now increase the Employment Allowance to mitigate the damaging impacts of these hikes on the small firms that make-up 99 per cent of our business community.”

Jason Govindji-Bruce, joint managing director at NORI HR and Employment Law in Lancashire, said: "In his announcement, the Prime Minister told us that increasing National Insurance by 1.25 per cent across the UK from next April could raise almost £36bn, with much of that expected to be allocated to meeting the costs of social care.

"This will be broadly welcomed by the care sector which has been in desperate need of new and more sustainable funding for some time, but care businesses need to see those funding increases now. If they have to wait, we could see a sharp rise in closures of care homes that are already under severe pressure from low occupancy and rising costs as a result of COVID.

"Increased employer National Insurance contributions, and the extra strain placed on cash flow, could be the straw that breaks the camel's back in many cases, pushing smaller care providers over the edge. There's also the risk that the increase will simply be passed back to commissioning authorities, making the cost of care go up and essentially reducing the full benefit of the proposals.

"Under pressure, some employers may be tempted to try and squeeze even more from staff when it comes to productivity and output in an effort to offset the increase in employment costs, which means a likely increase in disgruntled care workers leaving the industry when there is already a massive labour shortage."

Suren  Thiru, Head of Economics at the British Chambers of Commerce, said:   “Businesses strongly oppose a rise in national insurance contributions as it will be a drag anchor on jobs growth at an absolutely crucial time. Firms have been hammered by 18 months of covid related restrictions and have built up huge debt burdens.

“This rise will impact the wider economic recovery by landing significant costs on firms when they are already facing a raft of new cost pressures and dampen the entrepreneurial spirit needed to drive the recovery.

“Businesses generate prosperity, create jobs and support communities. The focus should be on creating the best possible environment for them to grow and thrive so they can sustainably deliver the tax revenue needed to support our public services and the wider economy.” 

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