National Insurance raid will hit women hardest, economists warn
The Government’s £25 billion National Insurance raid will disproportionately hit women workers, economists have warned.
Rachel Reeves, the Chancellor, announced a plan to increase the rate of employer National Insurance contributions (NICs) and to lower thresholds at which these start to be paid in Wednesday’s Budget.
Employer National Insurance will rise from 13.8 per cent to 15 per cent, and the threshold at which it starts being paid will drop from £9,100 to £5,000. The reforms are projected to raise £25 billion a year for the Exchequer by the end of this parliament.
While the Government has argued that payslips have been protected by the measures, analysts expect the changes to be felt through lower wages. The Office for Budget Responsibility has said that 80 per cent will be paid by workers through lost wage increases and lower income in the long-term.
The Institute for Fiscal Studies (IFS) warned that women were likely to be harder hit than men, with a spokesman telling The Telegraph: “In proportional terms, the employer NICs reforms do have a bigger impact on those on low earnings than those on middle or high earnings.
“Women are more likely to be low earners, so it is likely to hit women more than men in that regard.”
Prof Len Shackleton, a research fellow at the Institute of Economic Affairs, said: “As around 60 per cent of low-paid workers are women, any negative impacts on the pay and employment prospects are likely to be rather greater for women than for men.
“The impact will fall relatively more heavily on lower-paid workers – it will raise the cost of employing a low-paid worker by a higher percentage than a better-paid worker.”
IFS analysis of Ms Reeves’ National Insurance changes shows that the largest percentage rise in labour costs will be for employing the lowest-paid workers.
The changes are expected to cause a 5.4 per cent increase in the cost of employing a worker in the lower percentile of earners, but only a 2.5 per cent increase in the cost of employing a worker on a median income.
“Pushing in the opposite direction is that women are more likely to be public sector workers, and – at least in the short run – their wages are not likely to be affected much as the Government is providing additional funding to departments to pay for the higher employer NICs,” said the IFS spokesman.
Neil O’Brien, a Conservative MP, said: “You could not make it up. They said before the election no taxes on working people, but these taxes will clearly fall on working people.
“And they’ve chosen to focus on the lower income workers within that, which will hit women more than men. It’s the very image of the person they promised not to hit who is being hit by this.”
The Government has already faced a backlash from GPs over its National Insurance raid. While Ms Reeves said the NHS and the public sector at large would not be affected by the reforms thanks to a government reimbursement, GP surgeries are private partnerships and therefore not exempt.
Dr David Wrigley, the deputy chairman of the British Medical Association, has described the possible impact of the NI rise on GP surgeries as “monumental”.
Figures in the social care sector, which comprises around 1.7 million workers who will not be exempt from the rise, have also raised concerns.
The Liberal Democrats have called for social care employers to be included in the public sector exemption. Sir Ed Davey, the party’s leader, said: “It just shows that, yet again, the Government seems to have forgotten about care.”