Making workers foot the bill for social care and pensions is deeply unfair | Alfie Stirling

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Alfie Stirling

Guest
Taxing wealth and scrapping the upper earnings limit on national insurance would address generational inequality

  • Alfie Stirling is head of economics at the New Economics Foundation

Tuesday’s announcements on national insurance contributions (NICs) will see working age adults pay disproportionately for what is overwhelmingly pension-age care. Buried on the same day was the news that departments are being asked to plan 5% cuts to “non-priority” services each year until 2024. Within just weeks the furlough scheme is set to be dissolved, with an estimated 1.9 million staff still being supported at the latest count. And by October, 5m households relying on universal credit will face the deepest overnight cut to welfare in UK history. It’s a cruel start to the government’s new parliamentary term. Expect the phrase “Brexit dividend” to keep a low profile this autumn.

The latest reforms have provoked a sense of unfairness around the treatment of generational wealth and income. In today’s Britain, how you make your money matters. If you rely on earnings for a living, the government has asked that you contribute an extra 2.5% of your wages towards the costs of social care – ultimately the 1.25 percentage point increase to both employee and employer NICs will each come out of workers’ take-home pay. If you’re paid in dividends, you’ve been asked to contribute an extra 1.25% of your wages. But if you take your income in interest, rent, capital gains or pension annuity you’re effectively exempt from the new levy.

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