Stealth NI rise to nullify half of budget tax cuts

PHILIP HAMMOND has been accused of imposing a stealth tax on middle England after it emerged that nearly half the income tax cuts in his Budget will be wiped out by a rise in national insurance.

The Chancellor used his speech on Monday to bring forward income tax cuts to next April – just after Brexit – as he announced the era of austerity was “coming to an end”. But yesterday it emerged in the Budget small print that higher-rate taxpayers would lose out on the full benefit – £860 a year – as he had increased national insurance. They were instead left with just £495 as the Treasury clawed back an estimated £2billion.

Despite the cut, analysis by the Institute for Fiscal Studies found the amount of tax paid in the UK had reached the highest level for nearly 50 years. Since 2010 nearly a million people had gone into the higher bracket of income tax. Sir Steve Webb, a former pensions minister, now director of policy at Royal London, said: “The Chancellor was keen to get plaudits for taking people out of higher rate income tax, but conveniently forgot to mention he was increasing National Insurance contributions. This can only be described as a stealth tax rise.”

The income tax cuts yesterday caused a split within Labour after John Mcdonnell, the shadow chancellor, announced the party’s support for them. Members of the shadow cabinet and a dozen backbenchers opposed Labour’s position, condemning the tax rises as a “windfall for the rich”. Mr Mcdonnell said Labour would not take “money out of the pockets” of middle-income workers by reversing the tax cuts if elected, adding the party would “inherit the baseline we’ve got”.

But Emily Thornberry, the shadow foreign secretary, and Angela Rayner, shadow education secretary, criticised the plans. Andy Burnham, Manchester’s Labour mayor, said Mr Mcdonnell’s comments sent “a shiver down my spine”, calling the cuts “morally indefensible”.

Mr Hammond insisted the cuts were “right and moral”, stating that middle-income earners including teachers and police had been dragged into the higher rate. He said: “These are people who you could say should not be in higher rate tax at all.”

In his Budget the Chancellor brought forward to next April a rise in the personal allowance threshold to £12,500 and the threshold for higher rate income tax to £50,000. But the small print revealed that the threshold at which National Insurance payments are reduced from 12 per cent to 2 per cent had also risen to £50,000.

Steven Cameron, pensions director at Aegon, said: “The Chancellor was quick to showcase income tax savings in his budget speech but buried linked changes to National Insurance deep in the budget papers.”

A Treasury spokesman said: “We’ve cut income tax for 32 million British people. A typical higher rate taxpayer will be £495 better off from April 2019.”

BRITAIN is to hire business leaders instead of career civil servants as ambassadors after Brexit to boost the UK’S relations with the rest of the world, Jeremy Hunt is due to announce today.

The Foreign Secretary will set out plans to open up top diplomatic jobs as part of a push to recruit “under-represented groups” to act on behalf of the UK on the global stage.

The changes will see Britain adopt a more American approach to diplomacy. British ambassadors are traditionally civil servants, often with a long career in the diplomatic service, while US ambassadors are nominated by the president, which means roles can be filled by candidates from the business world if the White House deems them able.

Mr Hunt will tell an audience at the Policy Exchange think tank that almost 1,000 new diplomatic jobs will be created, abroad and in the UK.

The expansion of the British diplomatic network, which the Foreign Office said is the largest in a generation, will include 335 new diplomatic positions overseas, 328 in London, and 329 “new locally engaged staff ” abroad.