The chancellor Jeremy Hunt said that the Treasury will cut national insurance by two percentage points in today’s Autumn Statement.
Hunt said the government would “reduce debt, cut taxes and reward work”, announcing 110 measures that are intended to accelerate economic growth and increase productivity.
National insurance will be reduced from its current rate of 12% on earnings between £12,570 and £50,268 and 2% on anything above that to 10% on core earnings.
“High employment taxes disincentivise the hard work we should be encouraging,” he said. This will offer the average worker an extra £225 per year, and will be implemented from 6 Jan 2024 rather than in the new tax year in April.”
Self-employed workers will also see a reduction in tax, with Class 2 national insurance contributions – which are paid at a flat rate of £3.45 a week – abolished altogether from April 2024. Class 4 contributions, which are paid at a rate of 9% on earnings between £12,570 and £50,268, will also be cut to 8%.
The government had already announced that there will be a 9.8% increase to the national living wage in April 2024, rising from £10.42 to £11.44. The age at which people qualify for the mandatory hourly rate will also drop from 23 to 21 years old.
It also confirmed details of its controversial Back to Work plan, announced last week. The overhaul of the benefits system aims to move thousands of people off benefits and into employment, but with the threat of revoking benefits if they don’t engage.
Autumn Statement 2023
As part of the policy, people with mobility and mental health problems will be asked to work from home or risk losing their benefits.
“There are still over 7 million adults who are not working, despite there being a million vacancies unfilled. Many can and want to work, but our system makes it too hard,” Hunt added.
Universal Credit will be increased by 6.7% from next year, adding an extra £470 per annum for those who claim. The state pension will also rise, by 8.5% to £221.20 a week.
On skills, Hunt said that “no economy can prosper without investing in its people”, and pledged a further £50 million in funding for apprenticeships over the next two years in engineering and other “growth” industries.
Public sector productivity was under the spotlight, with Hunt claiming “we need a more productive state, not a bigger state”, and emphasising the role of the public sector productivity programme in making the civil service work harder.
The government has already announced an immediate cap on civil service headcount to stop any further expansion.
Shadow chancellor Rachel Reeves argued that working people remain “worse off”, despite the promised cuts to their taxes, adding that “growth has hit a dead end” under Conservative rule.
Labour leader Keir Starmer echoed her sentiments, saying: “Prices are still rising, energy bills are up and mortgage payments are soaring.”
After thirteen years of the Conservatives, working people are worse off.
Prices are still rising, energy bills are up and mortgage payments are soaring.
With 25 tax rises since 2019 the Tories are the party of high tax and low growth.
I’m proud to lead a changed Labour…
— Keir Starmer (@Keir_Starmer) November 22, 2023
TUC general secretary Paul Nowak said the measures would “level the country down” rather than up.
“This is not a plan for rebuilding Britain. It’s a plan for levelling the country down. At a time when our schools and hospitals are crumbling – the Chancellor has confirmed another round of punishing and undeliverable spending cuts to public services and investment.
“Be in no doubt – if the Tories win the next election, even more austerity is on the way. Cutting national insurance won’t make up for 13 continued years of economic failure on wages and living standards.
“Jeremy Hunt has nothing to smile about when working people are on course for a 20-year real wage freeze.”
Ben Harrison, director of the Work Foundation at Lancaster University said workers would welcome the cuts to national insurance, but added that the chancellor was “giving with one hand and taking away with another” by continuing to freeze tax thresholds.
He said the Back to Work plan in particular came with strings attached.
“It is welcome to see more funding for dedicated employment and health support for those currently out of work. But, if individuals cannot find work after two years, their welfare case would be closed, their benefits withdrawn entirely and their access to wider services such as free prescriptions and legal aid ended.
“The reality is these measures will likely only serve to heighten anxiety amongst already very vulnerable people.”
Neil Carberry, chief executive of the Recruitment and Employment Confederation said the government had taken “some significant pro-business steps” today, and that reducing employees’ national insurance contributions will be a “great way to make work pay”.
However, he added that downgraded growth forecasts from the Office for Budget Responsibility meant there could still be challenges ahead.
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“We need to get the UK powering on all its cylinders to really make progress. And we should remember that – despite today’s news – we are still heading for a post-war high on the tax burden over the next few years,” he said.
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