Jeremy Hunt has outlined his desire to abolish “unfair” national insurance tax – but admitted it “won’t happen any time soon”.
The chancellor described national insurance as a “tax on work” and said it he believed it was “unfair that we tax work twice” when other forms of income are only taxed once.
Mr Hunt used his budget yesterday to slash national insurance by 2p – rather than cutting income tax as some Tory MPs had demanded.
He also indicated plans to completely scrap national insurance contributions – a move Labour has branded “reckless”.
Speaking to Sky News from Liverpool this morning, Mr Hunt said: “We said we want to end that unfairness over time, it’s something we will only do when it’s possible to bring down taxes without increasing borrowing while also prioritising public services.
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“If we are going to succeed as a country, we need to make work pay.”
Labour has demanded the chancellor reveal how much his plan to scrap national insurance would cost, after its own estimates suggested the move could cost £46bn a year – equivalent to £230bn over the course of a five-year parliament.
The party has argued such a move could end up being more costly than the £45bn package of unfunded tax cuts announced in by Liz Truss in her mini-budget which unleashed economic chaos and upended her premiership.
Asked how he would pay for ending national insurance, Mr Hunt said: “We are not saying this is going to happen any time soon” and suggested that income tax and national insurance could also be merged.
According to the Office for Budget Responsibility, the independent public finances forecaster, income tax brought in £251bn in 2022-23, while national insurance brought in £177bn.
Merging the two could see income tax increase to bring in the extra money national insurance currently raises.
This could have a knock impact in a number of areas – including for pensioners, who do not pay national insurance but do pay income tax.
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Mr Hunt told Kay Burley on Breakfast the government had done an “enormous amount for pensioners” and had “really prioritised pensioners” following criticism for his decision to choose national insurance cuts rather than income tax cuts.
He pointed to the fact the government introduced the triple lock, whereby the state pension must rise by either average earnings, inflation or 2.5% every April – whichever figure is the highest.
“In the end, the way that we can keep increasing the state pension is by growing the economy and that’s why the measures I took yesterday are smart tax cuts that are going to help grow the economy.”