Two of Britain’s main business representative groups are the latest to speak out against a planned rise in National Insurance.

The Confederation of British Industry (CBI) and Federation of Small Business (FSB) have both criticised the plans for the tax to go up £1.25 more per pound in April. 

On Friday, MPs warned that the rise risked causing inflation to go up, which is at the highest it has been since 1992.

It is also feared that the rise would worsen the current cost of living crisis, which the TUC says is causing wage growth to slow. 

Secretary General, Frances O’ Grady said: “The Chancellor must come forward with a plan to tackle the cost-of-living crisis. Working people need stronger rights to bargain for fair pay increases. And families need more help with rising bills through universal credit.”

But, the government has defended its decision, and says it will use the estimated £12 billion it will get from the contributions to fund the NHS.

After the first year, the plan is for the funds to be used for the new Health and Social Care Levy.

Boris Johnson and Rishi Sunak, wrote in the Sunday times, that the plan was the right one, saying it “must go ahead”. They wrote: “By releasing the potential of the whole UK, we can become the most prosperous economy in Europe.”

The effects

The changes will mean that people on an average salary could pay out around £250 a year more than now. 

Those earning less than £9,564 will not have to pay the rise in contributions.

According to the FSB, its members would either have to reduce wages, let staff go or increase prices. It said the other increases to living costs meant its members would have no choice but to take action to protect their businesses.

The NHS Confederation, which represents health and care leaders has previously said the funding would be welcome to care for those who are vulnerable.

However, the CBI said: “If the government goes ahead as planned, then it is incumbent on them to use the March Budget to bring forward more ambitious plans to raise the longer term growth potential of the economy.” 

CEO of UK Hospitality, which represents pubs, clubs and restaurants, said the increase could worsen consumer demand. She added that her members also had to deal with rising VAT and the end of business rates relief.

She said: “Keep VAT at 12.5% will ease price pressure.