SNP and Plaid Cymru unite against National Insurance tax hike

The pro-independence parties are set to unite along with Green MPs during the National Insurance Bill's second reading today in the Commons.

Rachel Reeves raised the rate of National Insurance contributions (NICs) for employers during her Budget from 13.8% to 15% and lowered the salary threshold from £9100 to £5000.

First Minister John Swinney previously called on the UK Government to reimburse charities for the cost of increasing employers’ National Insurance, and Deputy First Minister Kate Forbes warned the move risks harming economic growth, highlighting estimates that Scotland faces more than £2 billion in higher taxes next year as a result of the autumn Budget, driven largely by increased NICs.

The cost of the National Insurance decision for Scotland’s directly-employed public sector is reported to be more than £500 million, and when costs include the likes of childcare settings, colleges, and adult social care, it is around £750m. 

The Budget's tax increase will cost public sector organisations in Wales £380 million.

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The remainder of the increase in employer NICs will be borne by businesses, with the Office for Budget Responsibility (OBR) warning earlier this week that the estimated average £800 cost per employee, will likely be passed on to workers with lower wages.
 
The UK Government has offered £300 million to Scotland to cover the cost of its own tax hike, however, Scottish Finance Secretary Shona Robison has warned the figure is "simply not good enough" and will not cover the planned rise in employer NICs.

Robison said more than £500m would be needed to cover the staff costs of those directly employed by in the public sector, rising to £750m when indirect employees such as those in childcare are included.

The amendment lodged by Plaid's Ben Lake MP, reads: "That this House declines to give the National Insurance Contributions (Secondary Class 1 Contributions) Bill a second reading because the Office for Budget Responsibility has found that the increase in employer national insurance contributions will lead to stalled real wage growth and higher prices for workers and incur huge additional costs for the public and third sectors as well as small businesses; notes that the Bill does not make provisions to reimburse in full the costs of increased employer national insurance contributions for the public sector and other groups including universities, GPs, social care organisations and charities; and further notes that the Government has chosen not pursue more progressive forms of taxation  such as the full equalisation of capital gains tax with income tax rates and by introducing a wealth tax to raise revenue."

Treasury spokesperson Lake called for “more progressive and fairer ways to raise revenue” and urged other MPs from Wales to support his party’s proposals.

He said: “The UK Government’s proposals risk causing both economic and social harm on communities. The OBR has warned that the increase in employer national insurance contributions will lead to stalled real wage growth and higher prices for workers.

“It will also impose significant additional costs on the public sector, third sector organisations, and small businesses. The UK Government had the opportunity to explore more progressive and fairer ways to raise revenue – such as equalising capital gains tax with income tax or introducing a wealth tax. Instead, they opted for a path that shifts the burden onto those least able to bear it, at a time of significant financial strain on public services and businesses.

“Plaid Cymru cannot support this approach, which prioritises short-term fixes over long-term fairness and sustainability. We are urging are fellow MPs from Wales to reconsider their support for these proposals, and instead support Plaid Cymru’s fairer solutions that reflect the needs of Wales and its communities.”

SNP Westminster economy spokesperson Dave Doogan MP said: “Two months on from the UK budget and it is clearer by the day that not only was Labour’s massive National insurance tax hike ill-thought out, but that Scotland was clearly an afterthought.
 
“In Scotland and across these islands, anger is growing and pressure is building for Labour to think again – with public services, charities and small businesses simply unable to bear the brunt of this massive tax hike.
 
“For a party that promised ‘change’ – what Labour ended up delivering in their first budget was lower growth for businesses and lower wages for workers.

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“Rather than asking those with the broadest shoulders to contribute more, Labour are instead trying to balance their budget on the backs of charities and public services like the NHS.
 
“For Scottish Labour MPs who backed cutting the Winter Fuel Payment for 900,000 pensioners, this is another test – will they keep blindly backing Starmer or join with the SNP in protecting Scottish services and businesses."