Jeremy Hunt, the Chancellor of the Exchequer, has revealed that his proposal to scrap employee national insurance could take more than a decade to implement. In a recent appearance before the Commons Treasury committee, Hunt acknowledged that the plan would require a significant increase in economic growth to avoid cuts to public services.
The surprise announcement, made in last week’s budget, is expected to be a key feature of the Tory election manifesto. However, economists and Labour critics have raised concerns about the feasibility of the proposal, warning that it could create a £40bn hole in the public finances without corresponding tax increases or cuts to services.
Hunt compared the plan to the gradual increases in the tax-free personal allowance implemented by previous Tory administrations over a period of 12 years. He emphasized that the proposal would not be funded by borrowing or cuts to public services, but rather by the growth of the economy.
Labour has seized on the unfunded nature of the pledge as evidence of the Tories’ failure to learn from past mistakes. Hunt accused Labour of “scaremongering” and challenged them to explain how they would fund their own spending plans.
While Hunt refused to provide a specific timeline for the implementation of the proposal, he emphasized that it was a long-term goal that would depend on economic growth. He did not rule out the possibility of combining national insurance with income tax to make the numbers work, hinting at a potential increase in income tax.
Overall, Hunt’s admission that the proposal could take years, if not decades, to deliver highlights the challenges facing the government in implementing such a significant policy change. The debate over how to fund the abolition of employee national insurance is likely to continue as the election approaches.