The recruitment industry has responded to the government’s announcement that health and social care reform will be funded through a 1.25 per cent increase in National Insurance, as well as an increase in taxes on share dividends.
Addressing the new changes, Neil Carberry, chief executive of the REC, said: “It’s vital that the social care system is properly funded – this has been a long time coming. But the 1.25 per cent rise in National Insurance, the UK’s biggest business tax, is the wrong choice. As a tax on jobs, and a tax on activity rather than profits, rising National Insurance will fall more heavily on the labour intensive sectors most affected by the pandemic. It also disproportionately affects lower earners. The accompanying rise in taxes on dividends will also hit small limited company directors, who were denied any support during the pandemic. We all agree that social care needs more funding, but increasing labour taxes as we try to recover from the pandemic is not the fairest way to do it.”
At the same time, APSCo’s Legal Counsel and head of public policy Tania Bowers, commented: “While we recognise the need for social care and NHS integration and reform, this manifesto breach is a concern in more ways than one. With 1.25 per cent payable by both worker and employer – 2.5 per cent in total – this will only serve to drive umbrella and PAYE agency worker costs up, which will exacerbate the on-going shortage of workers that UK employers are currently struggling through.
“The increase in dividend tax will only add more pressure to already stretched businesses,” she continued. “While the worst of the pandemic may appear to be over, many organisations are still trying to find their way out of a deep financial hole that they’ve been stuck in for the last 18 months. And with skills shortages impacting the bounce back for firms, adding an extra financial burden too soon could have a detrimental impact on the recovery of a significant proportion of UK businesses. While we do accept that the financial aid supplied during the pandemic will need to be recovered at some point, the timing of this is arguably too soon and we question the permanent introduction of a new tax.”
