Hiking National Insurance to pay for social care would be a "tax on jobs", a former top Treasury civil servant has said.
Lord Macpherson, who was Permanent Secretary to the Treasury between 2005 and 2016, said he was “discouraged” by the government taking the “easy option” of increasing National Insurance.
Speaking to Times Radio he said: “This is effectively a tax on employment. It’s a tax on jobs. And if you tax something more, generally, you’ll get less of it.
He warned that the rise would cause a “distributional issue” that would disproportionately affect young people.
He said: “National Insurance is paid only by people who are below pension age. It’s paid by young people who have taken a pretty big hit in recent years; what with tuition fees and the general stagnation in wages.”
Lord Macpherson said the social care reforms put forward a decade ago by Sir Andrew Dilnot were “of its time,” when “there was much more money available.”
He suggested the Bank of England raise interest rates to counter inflation.
It comes amid discussions that pensioners could lose the triple lock next year due to the “optics” of hiking taxes for young people to pay for expensive social care reforms.
State pension "triple lock"
One source told The Telegraph: “They are having conversations about this and whether the two things can come together. They are being considered together and that’s certainly what people want to do.”
Another cabinet minister said: “You are excluding the people who actually need this [social care reform] while hiking taxes on the young, so there is a difficulty in the optics of that.”
According to The Sunday Times the Prime Minister is facing opposition from five cabinet ministers over the proposed increase in national insurance.
An ally of Rishi Sunak, the Chancellor, told the newspaper that he is “uncomfortable” with the move, adding that it "smacks of intergenerational unfairness.”
It is thought that Sajid Javid, the Health Secretary and Boris Johnson are understood to be in alignment with the increase.
Mr Javid has previously said that a tax rise may be the “practical” and “obvious” solution.
The reforms will now likely be announced in the Autumn as they were delayed last week due to Mr Javid testing positive for covid-19, and Mr Johnson and Mr Sunak being forced to self-isolate.
Last week Sir Andrew Dilnot suggested that it was “entirely reasonable” for those over retirement age to help fund social care reforms.