Jeremy Hunt criticizes 'double taxation'; income tax and national insurance credit: Tejas Sandhu/Shutterstock
Jeremy Hunt announced a push to scrap national insurance for workers as a centerpiece of the Conservatives' re-election bid.
In his Budget speech on Wednesday, the Chancellor criticized «double taxation» by income tax and NI, vowing to «end this injustice».
He cut the NI rate for employees from 10 per cent to 8 per cent from next month, benefiting 27 million workers and matching a similar fall of 2p in the autumn.
Downing Street and Treasury sources confirmed the aim was as follows. getting rid of the NI staff element entirely, suggesting it could be a key manifesto commitment.
No timetable has been given for the radical ambitions and it would cost around £50 billion, prompting skepticism from political experts. over whether this will be implemented.
But this appears to have immediately opened a dividing line with Labour. A Labor Party spokesman refused to live up to that target, saying: “We will be commenting on policy rather than on strange commitments designed to raise the budget a bit, which appears to have been a bit of a wet joke for some of its supporters. ”
Rishi Sunak confirmed on Wednesday evening that scrapping NI was “our long-term ambition”. Speaking at the Center for Policy Research's 50th anniversary dinner, he said the NI cut represented «a £20 billion cut in personal taxes to date.»
He said: «Our country faces the problem is deep choice. If the opposition wins this year, it will use the turmoil of the last few years or the need to move to net zero to justify a massive increase in government. This means more influence for vested interests and unions.”
Referring to Margaret Thatcher, he added: “Mrs T knew that hard work should be rewarded and any extra penny our country earns is better spent by businesses and individuals rather than by the government. All other things being equal, lower taxes are better for economic growth.”
Lowering national income has become the most attractive element of the budget, allowing Mr Hunt to focus his limited free money from limited public finances on tax cuts.
The wage at which people no longer receive child benefit has been increased to £60,000, which would increase the number of families to half a million when changes to how they are paid are taken into account.
But non-resident status was repealed, the oil and gas windfall tax was extended, a new tax on vaping was introduced, and the vacation tax break was eliminated to raise money for tax cuts.
Overall, the Budget has cut the tax burden by £13.5 billion this year, meaning it will no longer hit the record high forecast in November. But it is still on track to reach 37.1 percent of GDP in 2028, its highest level since 1948.
The lack of new financial support for pensioners has been criticized. Rather than reducing workers' national income, a reduction in income taxes would help them.
In an interview on Wednesday evening, Hunt repeatedly refused to promise that income tax cuts would happen before the next election, despite Sunak promising this at various points in recent years.
He has also started to gamble. denied rumors that a May election would be called, saying the «working assumption» was that it would be held in the autumn, but adding it was Mr Sunak's decision.
The Chancellor has decided not to cut government spending plans in the post-election years after critics warned against deeper cuts to vulnerable departments to fund lower taxes.
Delaying a full spending review to determine where vulnerable departments are being cut. comes, he tied the hands of the Labor Party, and Labor leader Sir Keir Starmer was forced to make these difficult decisions if he won the election.
The Office for Budget Responsibility noted some positive financial signs (OBR) says the UK has emerged from recession after the economy contracted in the second half of last year.
Inflation is expected to halve within months to below the Bank of England's two percent target and is expected to remain there until the end of the decade.
However, living standards still suffered their biggest fall since records began.
The OBR said personal tax cuts announced last autumn had only been reversed by about half on Wednesday total additional tax revenue generated by freezing the thresholds. until 2028.
A projected rise in council tax is expected to wipe out any benefits households will receive from the NI cuts announced in the Budget, figures show.
Net immigration forecasts have also increased, while employment levels are estimated to , will decline in coming years despite Mr Hunt's efforts to get people off benefits and into work.
Towards the end of his Budget speech, the Chancellor said that: “The way we tax people's income is particularly unfair. If you earn income from work, you pay two types of taxes — National Insurance contributions and income tax.
“If you get it from other sources, you only pay one. This double taxation of labor is unfair. The result is a complex system that penalizes rather than rewards work.”
He later added that «our long-term goal is to end this injustice» and said: «When it can be done responsibly, when it can be achieved without increasing borrowing and when it can be delivered without compromising high-quality public services, we will let's continue to cut national insurance as we did today so that work actually pays.»
The position is likely to figure prominently in the upcoming election campaign, according to government insiders familiar with budget planning.
The phrase «double taxation» is performing well in polls, one Downing Street source said, and the new positioning is seen as helping restore confidence in the Conservative approach to tax cuts.
NI staff cut from 12 per cent before The figure was 10 percent in last year's fall statement, then dropped to eight percent on Wednesday. There was a similar reduction in NI paid by the self-employed.
The Treasury estimates that ending NI payments to all workers would cost around £50 billion and potentially benefit the average worker by around £2,000 a year. The new position does not involve stopping employers paying NI contributions.
Mr Hunt and other ministers have refused to give any details about how or when the ambition will be realized. Mr Sunak previously raised the issue of NI when he was chancellor.
Some Tory MPs have demanded specifics, with John Stevenson, who chairs the Northern Research Group, calling for a commitment to repeal NI in the election manifesto.
Others complained about the lack of income tax cuts. Suella Braverman, the former home secretary, said: “I really regret that income tax was not chosen as the tax to be cut because it meant pensioners lost out.”
David Davis, former Brexit secretary , said: «If I had my way, I wouldn't go for national insurance — I would go for income tax cuts.»
Julian Knight, a former Conservative MP and now an independent, said the Budget should have been a do or die moment, but it seems to be «don't do any more, and then, unfortunately, we'll die.»
With the Tories still trailing Labor by about 20 percentage points, there was debate over whether the budget would provide the significant boost to the party's electoral chances as Tory MPs had hoped.
George Osborne, the former Tory chancellor, said at his Political Currency podcast: «It is not a silver bullet that will save the Tory party's fortunes, but a strong salvo that will open the long campaign before the next general election.»
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