JEREMY Hunt wants to abolish National Insurance altogether as he shaved another 2 pence of the tax on wages.
The Chancellor used limited Budget headroom for sweeteners for boozers, drivers, parents caught in the child benefits trap and small businesses, but he insisted there was more to come.
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He declared he wants to “end the unfairness” of double taxing pay-packets – teeing up a major political battle with Labour.
Amid the limited pre-election giveaways, Mr Hunt surprised MPs by announcing: “We believe that the double taxation of work is unfair, our long-term ambition is to end this unfairness.”
He told the Commons: “If you get your income from having a job, you pay two types of tax – National Insurance contributions and income tax – if you get it from other sources you pay only one.
“The result is a complicated system that penalises work instead of encouraging it.”
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But in a nod to the eye-watering price tag, he warned it would only come “when it is responsible, when it can be achieved without increasing borrowing and when it can be delivered without compromising high quality public services”.
National Insurance will raise £172.3bn in 2023-24 – around 15 per cent of all the tax take, meaning Hunt’s dream comes at a hefty cost.
But Tory sources said they had reduced the tax by 4p in just six months, down to eight per cent of employees wages in a clear “direction of travel”.
The major hint at what the Tories want to fight the next election came as 27 million employee workers will be £900 better off next year after combined cuts to NICS announced in November and yesterday.
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Two million self-employed people will get an extra £350 thanks to a cut in the main rate of self-employed national insurance from eight to six per cent.
Bim Afolami, the Economic Secretary to the Treasury, last night suggested to Sky News that the Tory aim was to “eliminate” national insurance.
“This isn’t going to happen in the next few months, the running up to the end of this year, we’re not going to have enough time to do that,” he said.
“But I think people will see from what we’ve actually achieved already. taking a third off national insurance. Just to give you a sense of what that means, it means a family with two average earners on about £35,000 a year each.
“That’s worth £1,800 to them in a year. Real money really makes a difference.”
“Our aim is to eliminate that double taxation of work because it’s unfair.”
But despite the tweaks the tax burden still remains at a 70 year high.
Personal taxes are now at their lowest level since 1975 – but experts say any gains were likely offset by the continued freezing of thresholds for income tax.
The latest changes, taking effect from April 6, will mean workers see a one-third reduction in their main rate of national insurance contributions compared with a year earlier – the largest-ever cut – at a cost of £10.5 billion a year.
But the changes come against a backdrop of frozen thresholds which will see more people pulled into tax or higher brackets as their earnings rise under an effect known as fiscal drag.
Boss of the OBR Richard Hughes said the tax cuts helped to reduce the overall tax-to-GDP ratio by around half a percentage point compared to last year.
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But he warned: “it is still set to rise over the next five years to close to a post-war high of just over 37 per cent of GDP“.
Personal tax allowances and thresholds have been frozen since 2022.
But fiscal drag from wage rises will see three million more taxpayers, with over two million more in the higher rate, and more than half a million more additional rate taxpayers by 2028.
Meanwhile Mr Hunt used the Budget to increase other taxes.
It was bad news for smokers, who face stumping up a record £16 a packet and a new tax on vapes.
But in brighter news for parents, the High-Income Child Benefit Charge threshold was raised from £50,000 to £60,000.
The Non-dom loophole will be closed, as will tax breaks for holiday home owners.
Business class flights will be taxed a higher rate, but savers will be allowed to increase their ISA contributions by an additional £5,000.
The Chancellor also announced a “landmark” plan to cut down on waste and boost productivity in public services, including the NHS.
The strategy includes £3.4bn for the NHS to modernise its IT systems – and in turn unlock £35bn of savings.
The new tech system should slash 13 million hours currently lost by nurses and doctors every year to outdated computer systems.
And it will speed up results for 130,000 patients a year, potentially saving thousands of lives.
Mr Hunt said: “The NHS was there for us in the pandemic.
“And today with nearly £6bn of additional funding a Conservative government is there for the NHS.”
He also gave The Sun a shout out for our 14 year fuel duty crusade, as he froze the hated levy once again and extended the 5p cut.
He told MPs: “Lots of families and sole traders depend on their car. If I did nothing fuel duty would increase by 13 per cent this month.
“So instead, I have listened again… to the Sun newspaper’s “Keep it Down” campaign.”
Analysis from The Sun’s Political Editor Harry Cole
SO Jeremy Hunt has fired the starting gun on the election campaign with a highly political Budget.
There was lots of shouting, but with the cupboard bare, not as many giveaways as a Chancellor would have liked on the eve of battle.
As he delivered what will likely be the last Budget before Britain goes to the polls this autumn, the glum faces behind him would suggest Tory MPs did not think it would be enough to turn around the Conservatives bleak numbers.
Even with some tax cuts, the problem the Government has is the tax burden still remains at the highest level since 1947.
And nobody really thinks that will be going down rather than up under Labour.
On top of that, the cold hard numbers are hard to spin.
The small print of the Budget shows an extra £186.6 billion in stealth taxes over the next five years: more than double what the combined £105.4 billion savings from the combined tax cuts last November and today.
Also painful is the OBR’s prediction that net migration is going to stay at around 300,000 indefinitely and Tory tax changes have actually made Britain’s workshy issues worse.
With more people being dragged into higher tax bands, it turns out fewer people are bothering to work harder.
But the shape of the Tory manifesto is coming into sight, with the abolition of National Insurance clearly going to feature as a flagship election issue.
The dual taxation of wages through NICS and Income Tax has been a long running quirk of our complex tax system, but abolishing it completely would be eye-wateringly expensive.
That said, Hunt has reduced it by 4p, down to 8p in the pound on earnings in just six months, hence why he is dangling the prospect of phasing it out completely over the five years.
But given there are huge bills coming down the path for national security, massive compensation payouts, and sustainable public spending, is that loss of Treasury revenue really credible?
I suspect we will spend a large part of the election campaign arguing about that.
Hunt peppered his hour-long speech with attacks on the opposition parties, and countless name checks – and real cheques – for key marginal seats the Government hope to save at the election.
Given how many times he mentioned his own seat in Surrey and the vicious pop at the Liberal Democrats who could oust him, its clear the Chancellor is as worried about his own seat as he is about anyone else’s.
It was the tetchiest Budget I can remember, with countless interventions from the Deputy Speaker needed after Labour heckled their way through the measures.
If this is the shape of the election campaign to come, it’s going to be a very long year…
But Sir Keir Starmer gave the Budget a thumbs down, branding Rishi Sunak and Mr Hunt as the “chuckle brothers of decline”.
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He told the Commons: “The Chancellor, who breezes into this chamber in a recession and tells the working people of this country that everything’s on track. Crisis? What crisis?
“Or as the captain of the Titanic and the former Prime Minister herself might have said, iceberg? What iceberg?”
