An increase of half a percentage point beginning in April 2011 had already been announced in the full Budget earlier in the year, but the Chancellor has added an additional half a per cent on to help fund front line services.
In his speech the Chancellor explained that an estimated £3bn a year will be raised from 2011/12 as a result of the 1% National Insurance hike; this will go towards protecting front-line services in health, education and the police from the ‘tough and challenging public spending climate of the future’, Mr Darling said.
There is some protection for those on low incomes however, as the starting point from which National Insurance is payable will be raised. No-one earning under £20,000 will pay any more NICs.
The Shadow Chancellor George Osborne said the increase in NICs was the announcement the Tories would work hardest to avoid because the party sees it as a tax ‘on the many and not the few’.