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Chancellor Jeremy Hunt has said it could take “many parliaments” to realise his ambition to get rid of national insurance contributions, as the government fends off accusations from Labour that the project amounts to an irresponsible unfunded tax reduction.
Speaking to MPs on Wednesday, Hunt said the idea would amount to the “biggest tax simplification in our lifetimes”, but that the government was not putting a timeline on it.
“It is a long-term ambition to make work pay in the British economy — it is the right thing for economic growth,” Hunt told the Treasury select committee. “It will be the work of many parliaments. We will make progress but only when it’s affordable to do so.”
Hunt added that he would not pursue the measure if it undermined public services such as health or pensions or required higher borrowing. His ability to push it through would depend on future levels of economic growth, making it impossible to say when it would happen, he said.
He spoke as Labour claimed Hunt’s ambition to scrap employee national insurance contributions amounted to a “£46bn unfunded tax plan”, drawing parallels to the £45bn of unfunded tax cuts in the 2022 mini-Budget presented by former prime minister Liz Truss’s government.
Shadow chancellor Rachel Reeves claimed earlier on Wednesday that the Conservatives would fund the NIC abolition by “cutting state pensions or cuts to the NHS”, an argument that Labour is expected to use repeatedly ahead of the next general election.
Hunt replied on the social media site X that this was “scaremongering” by a Labour party that was opposed to tax cuts for working people.
Labour did not oppose Hunt’s Budget plan to cut a further 2p from NI rates in the House of Commons on Wednesday, saying that the “tax burden on working people is already too high”.
“I’m wondering how Labour MPs can square with their consciences voting in favour of a cut in national insurance [when] at the same time they are trying to scare everyone that it will mean cuts in funding for the NHS,” Hunt told the Treasury committee.
He added that the value of NIC receipts did not determine the NHS budget or the value of pensions.
The Conservatives plan to run their own mirror image campaign at the election, which is expected this year, claiming Labour would have to put up taxes to pay for unfunded spending commitments. Reeves has said she will show how the party’s sums add up.
The measures in this month’s Budget left the chancellor with headroom of £8.9bn against his key fiscal rule of getting public debt down as a share of gross domestic product in five years’ time.
Hunt defended the fiscal rules he was operating under, while acknowledging that when it came to getting debt down, “it is going to be a long and difficult journey but it’s right that we try.”
