The government has been a great help to households and businesses in the Covid crisis. They have provided innovative solutions, such as the furlough plan and bounce back loans.
This makes it even more disappointing and surprising that the government seems determined to ruin much of their good work, pushing ahead stubbornly with a 1.25 Percent increase in national insurance just at the wrong moment.
It will be effective in April, the month when the energy price cap ends. This could trigger a 50 percent increase in fuel prices. No exaggeration is made when we say that the economy is in a perfect storm.
Touker Sulman as seen in 2018. The Dragons’ Den panellist said: ‘These increases affect everyone, but they hit working people – those who will be affected by the NI rise – hardest’
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.
Furlough reduced incomes of even those who retained their job last year.
We are living in anxious times. The repercussions of these events will be felt for several months, even years. Do we have the right time?
Employees will be left with hundreds of pounds of unpaid wages, and some families may have to make difficult choices about food, heating or buying new shoes. Another financial blow is not what they or the economy need.
The Government must find money to pay the rising cost of the NHS. I also understand the need for funding social services.
Rishi Sunak’s economists designed the tax hike that was soon to come months before Omicron.
These issues are not new and they will continue to be a problem for many years.
It is too late to save the economy from being in such fragile shape. This is both morally and economically wrong.
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. It doesn’t take me to be right.
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.
It would mean that hundreds of thousands of jobs could be lost nationally, while those who work will see their pay frozen, which is combined with the inflation, lead to significant pay cuts.
People have less money, which can lead to a negative impact on businesses. Reduced spending in restaurants and shops means lower income from income tax or VAT
The Government – as well as the rest of us – will end up poorer if it goes ahead with its plan.
Suleyman said that the government does not control rising fuel prices, inflation worldwide or transport costs. It does however have control over the tax rate and when they are raised.
Businesses are already facing problems after the pandemic. Shops, restaurants, transport firms, and others will still be affected by the desire of many employees to continue working at home.
The combination of long-term issues, like punitive business rate, could push people over the edge.
It is my belief that the Chancellor hasn’t spoken to any commercial people lately. If he did, he would be aware of our deep concerns.
I talk to fellow business leaders all the time – not one of them is anything but anxious and appalled by this imminent tax increase.
This was the result of Rishi Sunak’s economic advice months before Omicron, when it seemed that we were headed towards calmer waters.
Nobody expected that a new version would hit pre-Christmas. But it did – and hard.
Omicron had an immediate impact on those who worked in retail and hospitality. This is just like the effect that rising mortgages, energy and other prices are having on our trade.
A tax increase is a sure recipe to cause economic chaos.
Many of my employees are feeling stressed and we’re reviewing their salaries in order to find ways we can support them.
Not all businesses can do this, and the situation will worsen as inflation rises.
It does not directly control rising fuel and energy costs, global inflation, or transport prices. It does however have control over the timing and tax of any tax increases.
“Retailers and hospitality workers saw Omicron’s immediate impact, much like we see the effect of rising mortgages on our trade now,” Suleyman explained.
Treasury should show the same agility and flexibility as it did during the pandemic, and adjust to the circumstances by delaying the NI increase instead of continuing.
The decision can be kept under review up to nine months after it is made, and even for longer periods of time, until there are no more living costs.
These are unprecedented times. It is necessary to take unprecedented steps in order for the economy to continue its growth. Encouragement to go back to work by the Government is a good thing.
People have been back in shops and on the streets since Plan B was suspended.
If the Government pushes for an NI increase, then those steps back towards recovery will be reversed.
The average person who is financially strapped has to cut back their spending. Demand falls and companies have to lay off employees. This is how recessions begin.
And with recession comes reduced tax revenues and that’s bad news for the NHS and social care – the very services that the NI rise is supposed to help.
Businesses and people need to be able to bounce back. An NI rise will cripple them – and the economy instead.
By postponing the NI hike, it’s possible to make adjustments. Just hope the Chancellor will be bold enough to take the correct decision.