On 7 September, the Government announced that it will be raising National Insurance contributions by 1.25%. Coming into effect in April 2022, it will be used to help fund a growing NHS backlog and support social care reform. Boris Johnson claimed in the House of Commons on Tuesday that the increase will raise an “essential” 36 billion over the next 3 years, with the first £30 billion generated from the tax hike allocated solely to the NHS (until 2023) after which it will be renamed as the ‘Health and Social Care Levy’ and placed as a separate category on individual payslips. The remaining £6 billion earned after 2023 will be used to address systemic issues within the social care system: a system which is responsible for helping people with physical and mental disabilities.
But the new levy has been criticised as generationally unfair; it disproportionately affects younger, low wage workers while protecting older, wealthier homeowners. The more an individual earns, the less of the tax they pay. For graduates who are about to enter into the world of work and are looking forward to earning their first paycheque, this announcement will be disheartening.
Some students believe that the levy will alienate young people, whilst Britons in general are split 50/50 in support of the tax. It is also a direct contradiction of the 2019 Tory Manifesto, which “guaranteed” a tax freeze. The average 25-year-old will now be paying £12,600 more over their lifetime compared to previous generations, despite benefiting less from the economy. Disproportionately high rent and mortgages, an extension in the state pension age and increased taxation have students and graduates feeling as though they are being saddled with the bulk of the burden. But how will graduate paycheque be affected, and how exactly does national insurance work?
National Insurance kicks in once an individual earns £9,568 (if you are employed by someone) and £6,515 if you are self-employed as of 2021/2022. These are called the lower thresholds. Any income earned above these points will now be taxed by 13.25%, until the upper threshold of £50,270 is reached. Beyond £50,270 the tax will fall to 2%. This is called a regressive tax, because the proportion you pay will decrease as you earn more money. A graduate on a starting salary of £25,000 will therefore be paying £2044.74 each year in National Insurance, which is £192.90 more than would have been charged before the rollout of the levy. Here is a breakdown of how incomes will be affected:
| Salary (£) | NIC after 1.25% levy (£) | Extra you pay (£) |
| £15,000 | £720 | £68.16 |
| £25,000 | £2,044.74 | £192.90 |
| £35,000 | £3,369.74 | £317.90 |
| £45,000 | £4,694.74 | £442.90 |
| £55,000 | £5,453.05 | £474.21 |
Cameron, a student going into his third year at Sheffield, said:
“I completely support funding the NHS and social care- my mum’s a care worker, she isn’t respected or paid properly for the work she does. But at the same time, I can’t help feeling like the odds are stacked more and more against us, even if the extra amount per year doesn’t seem too much. It feels unfair.”
Amrinder, a recent graduate from Birmingham said:
“With the national insurance increase, plus income tax, plus my student loan repayments, I’ll be losing nearly half of my salary. My take-home pay is only spent on me though. I know there’ll be families out there who are gonna struggle to adjust their budgets.”
The reach of the tax levy will also be expanding to include those above pension age who are still in employment. This means that a larger swathe of the population will have to get used to higher taxes, not just young people.
The breaking of the manifesto pledge has also been argued by some as necessary, with the repercussions of COVID-19 and the pressures of social care reform taken into consideration. The National Audit Office released a damning assessment of the social care market in 2020, stating that it ‘lacks long term oversight’ and that ‘people shouldn’t have to be forced to sell their homes to pay for their care.’
Social care is not free at point of use, and many families struggle to pay residential care home fees. In Sheffield these average at about £41,115 per year. Staff shortages and issues with low pay, coupled with a rapidly ageing population mean that both the care sector and the NHS are set to face significant challenges in the coming years. The effects of COVID-19 on NHS waiting lists have lifted the projected number of people waiting for consultations to 13 million, which is nearly 1 in 4 people; the highest in the history of the health service.
The question is whether the tax revenue generated will effectively and permanently plug the holes in the NHS and social care, and whether the government will continue to raise public taxes if these problems persist.