Chancellor confirms plans to reverse national insurance increase
The national insurance hike introduced by Boris Johnson’s government will be reversed from November 6, Chancellor Kwasi Kwarteng has announced.
Ahead of his mini-budget on Friday, Mr Kwarteng confirmed that he was cancelling the 1.25 percentage point increase imposed by Rishi Sunak when he was chancellor to pay for social care and dealing with the NHS backlog.
Mr Kwarteng said he would also be scrapping the planned Health and Social Care Levy which was due to come into effect next April to replace the national insurance rise.
The Government tabled legislation in the Commons on Thursday to enact the tax changes.
Mr Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.”
The Treasury said most employees will receive a cut to their national insurance contribution directly via their employer’s payroll in their November pay, although some may be delayed to December or January.
Critics of the move say the plan to reverse the rise in national insurance will disproportionately benefit higher earners.
Estimates suggest the poorest stand to gain about £7 while the wealthiest people could gain nearly £2,000.
Defending the plan during her successful Tory leadership campaign, Liz Truss said “growing the economy benefits everybody” and it is “wrong” to look at everything through the “lens of redistribution”.
Plaid Cymru’s Westminster leader Liz Saville Roberts said the proposals were “Tory fantasy economics at their cruellest,” adding they make “a mockery of poverty while toadying to their wealthy bankrollers.”
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Critics of bringing in higher NI also said that it was something to benefit wealthy landlords while taxing working, poorer tenants.
Not every tax is good and some reversals are worthwhile, even if they benefit the wealthiest disproportionately, but that’s a lot of lost income which needs to be explained and replaced.
Are we going to borrow more while crossing fingers wealthiest start spending again on things which benefit all of us rather than just moving increased wealth to sunnier tax havens? Or cut from other budgets further reducing the state more than it can go?
Its likely that people will spend this extra money, leading to additional tax being taken by the government through VAT etc