Chancellor Rishi Sunak has raised the National Insurance threshold by £3,000 in his spring statement, bringing it into line with the income tax threshold, in a £6bn tax cut that will benefit 30m people. Tony McDonough reports
Chancellor Rishi Sunak is handing 30m people a £6bn tax cut by raising the National Insurance threshold by £3,000 in his spring statement.
This brings the NI threshold into line with the income tax threshold and means people will be able to earn £12,570 without paying any tax. Mr Sunak also told the House of Commons that in 2024 the basic rate of income tax will be cut from 20% to 19%.
He said: “This is the largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade.”
Addressing MPs on Wednesday lunchtime, the Chancellor also offered a boost to around half a million small businesses by raising the employment allowance by £1,000 to £5,000. That will come into effect at the start of April.
And in a bid to address the soaring cost of living – inflation has hit a 30-year high of 6.2% – Mr Sunak said he was doubling the Household Support Fund, which is administered by local authorities, by £500m taking it up to £1bn. He also said he was cutting fuel duty by 5p for 12 months.
However, his statement immediately came under fire from Paul Johnson, the director of the Institute for Fiscal Studies (IFS) who said the Chancellor should have raised benefits levels.
Mr Johnson tweeted: “The big omission from this statement was anything for those subsisting on means tested benefits. They will be facing cost of living increases of probably 10% but their benefits will rise by just 3.1%. And cut compared to last year if you account for withdrawal of £20 UC uplift.”
And addressing the NI threshold increase, Torsten Bell, chief executive of the Resolution Foundation, added: “This is a tax cut for the middle and top of the income distribution – only £1 in £3 of the benefit goes to the bottom half.”
Mr Sunak told MPs: that cutting taxes “is not easy”, adding: “It requires hard work, prioritisation and the willingness to make difficult and often unpopular arguments elsewhere.
“It is only because this government has been prepared to make those difficult but necessary choices to fix our public finances that I can stand here and tell this House that not only are taxes being cut, but that debt is also falling whilst public spending is increasing.”
The chancellor also addressed the issue of employment training in the private sector, which he says will be reviewed as part of the Government’s new tax plan. He says this will include assessing whether the apprenticeship levy – a tax on the wage bills of major companies introduced in 2017 to pay for skills training – is “doing enough”.
And in order to incentivise domestic spending on decarbonisation, Mr Sunak said he was cutting the VAT on green energy materials such as solar panels and heat pumps from 5% to zero for five years.
In response Shadow Chancellor Rachel Reeves called the VAT cut on energy-saving materials “wholly inadequate”. She said he was targeting the wrong people, “hitting millions in the middle” rather than the very wealthiest.
She criticised him for not putting a windfall tax on oil and gas companies – which her party has been calling for – which she says would provide “real help to families”. Ms Reeves also said Sunak could have “properly scrapped” the planned rise to National Insurance instead of just tweaking the rates.