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Insurance industry

Tories Vow to Cut National Insurance Hike

Strategic Insights

— 2 min read

The Conservative Party has pledged to reduce a National Insurance (NI) tax increase planned by Labour, benefiting seven out of ten workers. The move comes after Chancellor Alistair Darling confirmed in the Budget that the one per cent hike would increase employee and employer contributions from April 2011, affecting those earning over £20,000 and raising employer contributions for those earning over £5,700. The planned hike was estimated to bring in £10billion a year, but the reduced version, costing £5billion, will be funded by a reduction in public spending rather than a rise in Value Added Tax (VAT) or any other tax.

Key Takeaways:

  • The Conservative Party has announced plans to reduce a one per cent hike in National Insurance contributions, benefiting seven out of ten workers.
  • The planned hike, confirmed by Chancellor Alistair Darling, would have increased both employee and employer contributions from April 2011, affecting those earning over £20,000.
  • Employer contributions for those earning over £5,700 would also have increased under the Labour plan.
  • Reducing the planned hike will cost the Conservatives around half the estimated £10billion a year Labour hoped to bring in through the tax increase.
  • The reduced version of the tax increase will be funded by a reduction in public spending of £5billion a year, rather than a rise in VAT or any other tax.
  • Critics point out that the Labour plan amounts to a tax on jobs that would undermine the recovery.
  • Research by the Federation of Small Businesses and the Centre for Economics and Business Research estimated that 57,000 jobs in small and medium-sized enterprises would be lost due to the Labour plan.
  • Additionally, 12 per cent of employers intended to recruit fewer staff as a result of the Labour hike in NI contributions, while eight per cent would cut jobs.

Statistics:

  • 57,000: The estimated number of jobs in small and medium-sized enterprises that would be lost due to the Labour plan.
  • 12 per cent: The percentage of employers who intended to recruit fewer staff as a result of the Labour hike in NI contributions.
  • 8 per cent: The percentage of employers who would cut jobs due to the Labour hike in NI contributions.
  • £5billion: The reduction in public spending that will fund the reduced version of the tax increase.
  • £10billion: The estimated amount of money Labour hoped to bring in through the one per cent hike in National Insurance contributions.

Sources:

  • The Sun, c.hartley@the-sun.co.uk
  • "Reduction plans confirmed by Chancellor Alistair Darling" - Budget
  • Federation of Small Businesses and the Centre for Economics and Business Research

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