8th September 2021
Good morning On Monday Transport of London recorded its busiest morning since March 2020 but is still at half of the pre-Covid levels. While we’re not rushing back to our desks, leisure and weekend travel has returned a lot quicker according to data from the Department of Transport.
Today's stories
Major tax hike on the way
Crypto becomes official in El Salvador
TAXMajor tax hike on the way
What’s going on?Yesterday the government announced its much rumoured plans to raise National Insurance (NI). It will raise £36bn over the next three years to fund the NHS and social care.
Why is this important?
Over the weekend there was widespread speculation that a tax increase was on the way. The rumours proved to be true but with some tweaks. Here are the key details:
NI will increase by 1.25% from April 2022 paid by both employers and workers. This would be an extra ÂŁ255 a year for someone earning ÂŁ30,000 and ÂŁ505 for those on ÂŁ50,000.
From 2023 it will become known as a separate "health and social care levy" on wages - calculated in the same way as NI and appearing on payslips.
This will be paid by all workers including those above the state pension age of 66 and will only go towards NHS and social care costs.
Taxes on dividends will also go up by 1.25%.
The announcement represents a major U-turn for the government who pledged not to increase taxes in the 2019 election manifesto. Boris Johnson argues that the pandemic has made it necessary to raise taxes to deal with the NHS waiting list backlog and also the longstanding social care crisis. The ageing UK population has created a huge demand for social care. On top of this previous governments have failed to fund and reform the system meaning that to right the wrongs of the past will now cost billions of pounds.The government will introduce a £86,000 cap on how much people pay for long term care, with people with assets worth less than £20,000 being fully subsidised.Critics argue that increasing NI will disproportionately impact lower income and younger workers in order to pay for the care of the older generation.TakeawayThe Conservative party has always prided itself as being the “low tax party” but implementing a significant tax increase is marring that reputation. Boris Johnson also refused to confirm that no further tax increases would be on the cards. The government is reluctant to borrow more given that the national debt is at record peacetime levels.MPs are due to vote on the plans today and with a Conservative majority in parliament it looks likely to go through.
CRYPTOCrypto becomes official in El Salvador
El Salvador has become the first country to make Bitcoin, the world’s largest cryptocurrency, legal tender. This means alongside the US Dollar, Bitcoin is an official currency and can be used to buy any good or service.Every person in the Central American country was offered $30 worth of Bitcoin through the nation’s digital wallet, Chivo (Salvadoran slang for “cool”). Hundreds of Bitcoin ATMs have already been set up across the country.40-year-old President Nayib Bukele says digital currency adoption will bring about a huge improvement to the quality of life for Salvadorans.That’s because El Salvador is hugely dependent on payments from the two million Salvadorans living outside the country sending money to family back home. These payments amount to $4bn, around 20% of the country’s GDP.These transfers can take days to arrive, and usually have high fees. Bukele claims Bitcoin will speed things up and smooth things out.It’s a massive experiment, polls have reported that most Salvadorans are opposed to the adoption of Bitcoin and are confused about what it means.Bitcoin has proven to be very volatile currency which is not a great quality if you want stable prices and a solid banking system.The first day of implementation has already got off to a rocky start with tech issues, a fall in Bitcoin's value and protesters taking to the street.
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