Chancellor rules out quick end to National Insurance system
JEREMY Hunt has said his ambition to scrap National Insurance contributions will not happen in the next Parliament if his party remains in power.
The Chancellor used his Budget earlier this month to set out a 2p cut in National Insurance from April with a vague promise to deliver a simpler tax system by eventually getting rid of it altogether.
Giving evidence to the Treasury Committee yesterday, the Chancellor said: “It won’t happen in one Parliament, but it’s a long-term ambition. If we do that, that will be the biggest tax simplification of our lifetimes.” Rishi Sunak recently stressed his commitment to ending the “unnecessarily complex” system of having both income tax and National Insurance contributions.
The Prime Minister told The Sunday Times “significant progress” could be made towards the goal of eliminating the tax during the next Parliament if his party remains in power.
The aspiration to end the double taxation of work by axing National Insurance has been attacked as an unfunded promise by Labour, which pointed out it would cost the Exchequer around £46bn.
Sir Keir Starmer yesterday said it
“could be 2022 all over again”, as he sought to draw comparisons with Liz Truss’s short-lived premiership with “unfunded” tax cuts in the Budget.
“They tried that under the last administration and everybody else is paying the price,” Sir Keir told the Commons. “All we need now is an especially hardy lettuce and it could be 2022 all over again.”
Labour said axing National Insurance could lead to cuts to pensions and the NHS.
The party gave its backing to the National Insurance cut but questioned if the Conservatives’ floating the prospect of abolishing the tax could mean “the end of the state pension as we know it”. Shadow Treasury Minister James Murray claimed the Government was “giving with one hand but taking far more with the other”.
He added: “The truth is that neither these National Insurance cuts nor anything else in the Budget change the fact that people across Britain are worse off under the Conservatives.”
He claimed the pledge was an “unfunded” £46 billion tax cut, asking: “Will it be funded by higher income tax? Will it be funded by cuts to public services? Will they push up public borrowing?”
The Labour frontbencher questioned what the abolition of National
Insurance or merger with income tax would mean for the link between National Insurance contributions and the state pension.
Mr Murray said: “Will the Minister explain how will people know what their future entitlement to the state pension will be?
"What would be the basis for state pension entitlement without employee National Insurance contributions?
"Does their plan mean the end of the state pension as we know it?”
Mr Hunt told the Treasury Committee that the amount of money raised by National Insurance does not determine how much goes into the state pension or the NHS.