Hunt rules out scrapping National Insurance in the next five years

THE Conservatives will not abolish National Insurance for at least five years, Jeremy Hunt has warned, despite announcing in the Budget that he would like to scrap the tax.

Mr Hunt suggested that getting rid of NI would take more than one parliamentary session, suggesting it could still exist well into the 2030s.

Speaking to MPS on the Treasury select committee, he said: “If we abolish the double tax on work, which the Conservative Party wants to do over time – it will not happen in one parliament, but it is a long-term ambition. It is perfectly possible to deliver these commitments over time if it is something you really want to do. In this case, the impact on growth will be very, very positive.”

Parliaments last for up to five years before an election must be called.

Mr Hunt cut the rate for employees and the self-employed by two percentage points in the Budget last week, in a move that followed a similar cut announced in the Autumn Statement and introduced in January.

Combined, the reductions in the rate will save a typical worker £900 per year in NI payments. The Chancellor said the aim is to make work more attractive by reducing the tax burden, encouraging more people to take jobs, or to increase their hours at work.

He said: “We want to bring down the tax on work, end the unfairness of double taxation on work, because that brings more people into the labour market. The cuts bring about 100,000 people in, and another 100,000 from the National Insurance cuts in the autumn.

“That is filling about one-in-five vacancies across the economy. They are, in terms of economic growth, some of the most destructive taxes.”

When the latest tax cut comes into force next month, it will take the headline rate of employee National Insurance

down to 8pc, from 12pc before the Autumn Statement.

The levy still raises about £50bn per year for the Government, so it is not immediately obvious how the Chancellor can abolish the charge at a time when the Exchequer is still borrowing heavily to fund spending.

Mr Hunt told the Treasury select committee that he could not give a detailed timeline of what would happen in the event that the Conservatives win the next election, arguing that the pace of further cuts will depend on economic circumstances.

He said: “I was very explicit when I announced that long-term ambition that it would not be funded by cuts to public services or by borrowing.”

Mr Hunt raised the prospect that it could take a decade or more to fully scrap the tax, comparing it to the move to raise income tax thresholds, which was a major Conservative campaign before the current freeze took hold.

He said: “Just as with our long-term commitment to increase the personal tax threshold, first announced in 2010, when it was about £6,500, got to about £12,500 twelve years later in 2022, that was a long-term commitment.”

Mr Hunt also said it will be “a long and difficult journey” to bring down debt substantially as a share of GDP, with a significant acceleration in economic growth required to have a major effect.

The Chancellor said there are significant pressures for more spending.

He added: “We will need to spend more on defence. The world is becoming more dangerous.”