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By Rachel Lawler

The government has that it will be reversing the National Insurance increase that came into effect in April 2022.

The government previously increased National Insurance by 1.25 percentage points, which meant that most employees saw their rates increase from 12% to 13.5%, in a bid to increase spending on health and social care.

From November, this increase will be reversed as part of the governments plan to “cut the tax burden and promote economic growth”.

Plans to introduce a ‘Health and Social Care Levy’, which would have replaced the increase and appeared as a separate deduction on wage slips, have also been dropped.

Kwasi Kwarteng, Chancellor of the Exchequer, commented: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.

“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn.”

Neil Leitch, chief executive of the Alliance, commented: “While the reversal of the National Insurance uplift may offer some comfort to providers, it does not go far enough to address the severe challenges the sector is facing.  

“We know that settings spend the majority of their income on staff wages so there’s no doubt today's announcement will offer providers some breathing space while ensuring that educator’s salaries are not affected. That said, not only is the sector being pushed to the brink due to years of underfunding, it is also in the midst of a severe recruitment and retention crisis and facing rising inflation and energy costs.  

“For these challenges to be properly be addressed, the sector must be realistically funded throughout the cost-of-living crisis and beyond. It is clear that short-term remedies will not solve the plethora of long-term issues the sector is grappling with.”