· 2 min read · News

The Conservatives promise not to increase National Insurance Contributions next year

Published:

The Conservatives have announced a Tory Government will not increase National Insurance Contributions (NICs).

The Chancellor of the Exchequer Alistair Darling confirmed last week in the Budget that Labour plan to go ahead with the 1% hike in NIC in April 2011 but shadow chancellor George Orborne has labelled this tax rise on jobs.

According to Osbourne stopping the planned increases in NICs will result in seven out of 10 working people being better off. A Conservative Government will take immediate action to start cutting Government waste, in order to spend £6 billion less in 2010-11 than Labour's plans, he said.

Osbourne said: "The re-election of a Labour Government under Gordon Brown - with more debt, waste and taxes - will bring us a new recession", George Osborne said, speaking alongside Ken Clarke and Phillip Hammond.

"Labour will kill the recovery with their tax on jobs. We will cut Labour waste to stop it."

Former Government advisers Sir Peter Gershon and Dr Martin Read, now members of the Conservatives' Public Sector Productivity Advisory Board, advise that savings of £12 billion across all departmental spending are possible in-year without affecting the quality of front line services.

Labour is planning to raise Employees National Insurance Contributions (NICs) for everyone earning over £20,000. The Conservatives have pledged will stop this increase altogether for everyone earning under £35,000 by raising the primary threshold at which people start paying NICs by £24 a week, and raising the Upper Earnings Limit by £29 a week.

Osbourne added: "Labour are also planning to raise Employers NICs for everyone earning over £5,700. This is a tax on jobs that will undermine the recovery. We will raise the secondary threshold at which employers start paying NICs by £21 a week, saving employers up to £150 for every person they employ relative to Labour's plans. This will reduce the cost of Labour's tax rise on employers by more than half."

The CIPD claim Osbourne has made the right call. Dr John Philpott, chief economic adviser at the CIPD said: "George Osborne's proposal to cut much of the government's hike in employer's national insurance contributions shows that he has wisely listened to British business. The CIPD welcomes Mr Osborne's move, accepting that it would be difficult for him to cancel the planned increase in full. The move will be good for jobs.

"However, the shadow chancellor is perhaps less wise in proposing to cut £6 billion from Labour's spending plans in 2010-11. The case for and against immediate action to reduce the fiscal deficit may be finely balanced but with the economy recovery still very weak and potentially fragile, Mr Osborne is in this respect clearly taking a gamble on growth and employment."