Jeremy Hunt has admitted his unfunded proposal to scrap employee national insurance could take more than a decade, after conceding it would require a sharp increase in economic growth to avoid making cuts to public services.
With the government under growing pressure to explain how the plan could be afforded, the chancellor told MPs on the Commons Treasury committee: “It won’t happen in one parliament, but it’s a long-term ambition.”
The surprise plan announced in last week’s budget is expected to form the centrepiece of the Tory election manifesto. However, leading economists and Labour have warned that the overnight abolition of employee national insurance could blow a hole in the public finances worth more than £40bn without corresponding tax rises, swingeing cuts to services, or higher government borrowing.
Hunt compared it to increases in the tax-free personal allowance by successive Tory administrations over a period of 12 years, adding: “I can’t give you a timescale because this is going to be the work of many parliaments.
“I have said there are two very clear conditions upon which the delivery of this ambition depends: one is that it won’t be funded by borrowing, the other is it won’t be funded by cuts to public services. So that means ultimately it depends on the growth of the economy.”
The chancellor’s comments come as Labour attempts to capitalise on the unfunded pledge as evidence of the Tories failing to learn from Liz Truss’s ill-fated mini-budget, arguing that a policy costing more than £40bn could put public services at risk.
Rishi Sunak has a plan for an unfunded tax cut that will leave you paying the price.
— The Labour Party (@UKLabour) March 13, 2024
Now where have we heard that before? 🤔#PMQs pic.twitter.com/sxurbnGl3e
Hunt accused Labour of “scaremongering” while telling MPs that if his plan meant cutting funding for the NHS, “I would vote against it”.
Throwing back the challenge to Labour to explain how it would fund its spending plans, he said Keir Starmer’s party had supported £20bn of reductions in national insurance at the autumn statement and spring budget.
“I’m just wondering how it is that Labour MPs can square with their conscience voting in favour of a cut in national insurance, at the same time as they’re trying to scare everyone that it’ll mean cuts in funding for the NHS?”
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However, the chancellor admitted his proposal would take years, if not decades, to deliver, while refusing to answer whether national insurance could be combined with income tax – which could entail a potential increase in income tax – to make the numbers work.
“We’ve said we want to deliver this policy by reducing national insurance, that is our stated plan,” he said.
“It is a long-term goal, just like some of the other long-term goals that previous Conservative administrations have announced. But we can’t tell you when we’ll deliver it because that depends on economic growth.”
