Conservatives promise to cancel 1% NI rise for low earners

The Conservatives are set to announce that they will block most of the National Insurance rises planned for 2011.

Chancellor Alistair Darling previously announced two 0.5% increases in National Insurance to take effect in April 2011 – one in the 2008 pre-Budget report and one in 2009.

But shadow chancellor George Osborne will reveal that the Tories plan to scrap the 1% rise for lower earners, while still charging those on higher salaries.

Osborne will refer to the tax increases as “a tax on jobs and the middle classes” and state that seven out of 10 workers would be better off under Conservative plans.

Employer groups are likely to welcome the decision, if business contributions are also affected. Earlier in the year the Chartered Institute of Personnel and Development (CIPD) and the British Chambers of Commerce (BCC) wrote to the business secretary Peter Mandelson warning of the implications of the National Insurance rise.

But Labour has said the Conservatives have yet to announce how they will fund the National Insurance policy, the BBC reported.

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The Tories are expected to say they will cover the lost tax by cancelling some projects in this financial year while reducing waste and cutting procurement costs.

The chief secretary to the Treasury, Liam Byrne, said: “They [the Conservatives] have entirely lost sight of cutting the deficit. Rather than making more promises he can’t afford, the test for George Osborne is to tell people how he’ll pay for the ones he’s got.”