© Reuters. British Chancellor of the Exchequer Jeremy Hunt presents the Financial Statement and Budget Report at the House of Commons in London, Britain, March 6, 2024. UK Parliament/Maria Unger/Handout via REUTERS/File Photo
By David Milliken
LONDON (Reuters) -Britain’s Conservative Party will need multiple five-year parliamentary terms to fulfil its ambition of scrapping the national insurance payroll tax, finance minister Jeremy Hunt said on Wednesday.
“I can’t give you a timescale because this is going to be the work of many parliaments,” Hunt told a parliament committee when asked how soon he expected to achieve the goal he and Prime Minister Rishi Sunak set out after last week’s annual budget.
“There are two very clear conditions upon which the delivery of this ambition depends. One is that it won’t be funded by borrowing and the other is that it won’t be funded by cuts to public services,” Hunt added.
Hunt reduced the main rate of employee national insurance contributions to 8% from 12% at last week’s budget and in a mid-year fiscal update in November.
The Conservatives may not have much time to cut it further, however, as they significantly trail the opposition Labour Party in opinion polls ahead of an election expected later this year.
Speaking earlier on Wednesday, Jonathan Ashworth, a Labour lawmaker who represents the party on fiscal policy, said ending national insurance would create a 46 billion pound ($59 billion) hole in the Conservatives’ budget plans and “can only lead to higher borrowing, higher taxes on pensioners or the end of the state pension as we know it”.
National insurance was historically used to determine entitlement to state pensions, although in practice these are now funded through general taxation.
Unlike income tax, national insurance is only charged on employment income, exempting income from savings, pensions and property.
Currently employee national insurance contributions raise 71 billion pounds a year, about 7% of Britain’s total revenue.
The Conservatives’ pledge to scrap them comes as the overall tax burden is on course to reach its highest since World War Two, as thresholds for paying most taxes have not kept up with recent rapid inflation.
($1 = 0.7809 pounds)
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