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IoD calls on government to scrap National Insurance rise

1 February 2022

The Institute of Directors has written to the chancellor of the exchequer Rishi Sunak urging him to rethink April's planned rise in National Insurance contributions - which it dubs a "jobs tax".

Jonathan Geldart, director general of the Institute of Directors (IoD), has written to chancellor of the exchequer Rishi Sunak to make the case for scrapping the tax rise. The IoD has also launched a #ScrapTheJobsTax online petition.

Under government plans, employees, employers and the self-employed will pay 1.25p more in the pound in National Insurance contributions (NICs) from 6 April 2022. Both Rishi Sunak and prime minister Boris Johnson have insisted that the rise will go ahead, despite the concerns of business groups including the IoD, the Federation of Small Businesses and the CBI.

In his letter, Geldart set out five key impacts that the National Insurance rise will have:

  • It will reduce take-home pay, during a cost-of-living crisis;
  • It will lead to job losses;
  • It will damage the economy;
  • It will cause inflation to rise even further;
  • It will hit hardest those firms that have already suffered the most from the pandemic.

Both the Institute for Fiscal Studies and the National Institute for Economic and Social Research have recently advised that the UK's fiscal position provides more room for manoeuvre than expected. Now the IoD is calling on the Treasury to conduct its own assessment of the impact of the proposed NI rise on the economy and on business.

Geldart said: "The forthcoming rise in National Insurance will have a negative and significant impact on our members and on the wider macroeconomy. In the last few months, the case against the tax rise has, to my mind, only become stronger. That's why we are urging the chancellor to think again about raising National Insurance contributions and are asking for the opportunity to discuss the matter as soon as possible."

Research by the IoD has found that nearly four in ten business leaders said that they would "raise prices because of the tax rise". The key findings show that:

  • 38% will raise prices to offset some, or all, of the cost;
  • 19% of business leaders say they will employ less people;
  • 15% will reduce investment.

However, 20% say it won't affect their business and 29% say they will absorb the cost increase.

Kitty Ussher, IoD chief economist, said: "The forthcoming rise in employers' National Insurance contributions is of real and genuine concern to business leaders, particularly those running small and medium-sized businesses that are the growth engine of our economy.

"Our data shows that the tax rise is also of itself adding further inflationary pressure at a time when prices are already rising fast. Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans."

Written by Rachel Miller.

Image: HM Treasury on Flickr.

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