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Chancellor to reverse national insurance hike

National insurance costs went up in FE by 1.25 percentage points in April, despite schools and public sector organisations getting compensated.

National insurance costs went up in FE by 1.25 percentage points in April, despite schools and public sector organisations getting compensated.

22 Sep 2022, 15:41

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A deeply unpopular tax-rise that was estimated to cost the college sector an extra £30 million this year has been scrapped. 

The new chancellor, Kwasi Kwarteng, announced this afternoon that the 1.25 percentage point increase to national insurance, which came into force in April, will be reversed on November 6, 2022.

Colleges and training providers alike complained that the national insurance hike came at a time of unprecedented cost pressures, and college leaders were furious when they were excluded from a scheme which compensated schools and public sector organisations. 

The cut could provide an in-year saving of around £15 million for the college sector. 

The Association of Employment and Learning Providers estimated that the move will save training providers between £20-£25 million.

This comes a day after the government announced plans to help non-domestic energy users, including colleges and training organisations, with their energy bills this autumn. 

Kwarteng will publish the government’s ‘growth plan’ tomorrow which will include other measures designed to support business through growth policies and more tax cuts. 

Training providers welcomed the move but told FE Week that any savings would be swallowed up by rising inflation.

Jane Hickie, chief executive of the Association of Employment and Learning Providers, said: “This tax cut will help individuals and businesses at a very challenging time. However, in the context of spiralling inflation, the savings made from cutting National Insurance alone will be a drop in the ocean for training providers.

“The Chancellor must go further and ensure that funding available for high quality training programmes matches the true cost of delivery” she said.

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