Hunt: Axeing NI will take us over 10 years

JEREMY Hunt warned yesterday it would take more than a decade to abolish National Insurance – and hit out at Labour for scaremongering over the issue.

The Chancellor, who has slashed 4p off the main rate of NI in less than six months, confirmed it was his ‘longterm ambition’ to abolish the ‘unfair’ tax, which is levied on wages alongside income tax.

But he told the Commons Treasury committee this would only be done when it became affordable. ‘It won’t happen in one Parliament, but it’s a long-term ambition,’ he said. ‘This is going to be the work of many Parliaments.’

Labour yesterday claimed the pledge amounted to an unfunded spending commitment worth £466billion and urged the Chancellor to set out how it would be paid for. But Mr Hunt suggested NI would be reduced gradually from its new 8p level as the economy grew. ‘There are two very clear conditions on which the delivery of this ambition rests,’ he said. ‘One is that it won’t be funded by borrowing, the other is that it won’t be funded by cuts to public services.

‘So that means that ultimately it depends on the growth of the economy. Now I can’t predict the rate at which it will grow.’

In a boost for the Chancellor, figures yesterday showed the economy bounced back at the start of the year and may already be heading out of recession. Gross domestic product grew by 0.2 per cent in January, according to the Office for National Statistics – boosted by a recovery for retailers and housebuilders.

The economy shrank by 0.1 per cent in December, and analysts are waiting for the quarterly figures before declaring whether the shallow recession is over.

Labour, which has backed the Government’s two successive 2p cuts in NI, claimed the Chancellor’s pledge to abolish the tax could be a threat to pensions and the NHS. Shadow paymaster general Jonathan Ashworth said that the ‘state pension as we know it is at risk’.

But Mr Hunt told MPs that it had been ‘many decades’ since NI had funded the state pension. He pointed out that his latest 2p cut was accompanied by an increase in NHS spending and an agreed 8.5 per cent increase in the state pension, in line with the triple lock.

Rounding on Labour, the Chancellor said: ‘This is just scaremongering. The value of NI receipts do not determine the NHS budget or the value of pensions. Those decisions are taken entirely separately.’

Mr Hunt has declared he would ‘ love’ to scrap the tourist tax, for which the Daily Mail has campaigned. He said he would rather tourists were spending their money in the UK and the matter was ‘under review’.