13 March 2024 , 14:14
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Rishi Sunak twice refused to rule out massive cuts to pensions and the NHS to pay for his "fantasy" plan to scrap National Insurance.
The PM has been accused of acting like Liz Truss after saying his goal is to abolish National Insurance Contributions (NICs) altogether. Alarming new Labour analysis suggests pensioners could be hit by an £800 tax hike - more than wiping out the gains from the triple lock over 14 years.
Scrapping NICs will wipe £46billion from the Treasury each year, it is estimated. Labour has warned that the future of the state pension hangs on the next general election.
In a lively PMQs session the Prime Minister was told the tax raises vital cash for pensions and national security, as well as the health service. Keir Starmer challenged him to clarify which of these he'd take money from if he does scrap NICs.
The Labour leader said: "National Insurance Contributions fund state pensions and the NHS. So is the Prime Minister's latest unfunded £46billion promise to scrap National Insurance going to be paid for by cuts to state pensions and cuts to the NHS?"
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The Prime Minister swerved the question, instead accusing Labour of making a "litany of unfunded promises". Mr Starmer pressed him, telling MPs: "He thinks he can trick people to think shaking the Tory magic money tree will bring it into existence."
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And the Labour leader went on: "Let's be clear - 80% of National Insurance is spent on social security and pensions and 20% is spent on the NHS. He's either cutting pensions or the NHS or he will have to raise other taxes or borrowing. Which is it Prime Minister?"
Yet again Mr Sunak declined to respond to the question, telling the Commons: "If you actually listen to the Chancellor last week, what he would have said is NHS spending is going up." Mr Starmer then pointed out that making billions of pounds of unfunded tax cuts could be disastrous.
He said: "They tried that after the last administration (when Liz Truss was PM) and everybody else is paying the price." Labour analysis of Jeremy Hunt's Budget found scrapping NICs could blow a £35billion hole in state pension funding.
Jonathan Ashworth MP, Labour’s Shadow Paymaster General, said the Tories must come clean about how the Tories would do it - raising the possibility of a payroll tax. He said: "It's not good enough just to say they're going to get rid of the official contribution without outlining how that impacts pensions."
He went on: "If they cannot answer these questions sufficiently, it will be clear at the next general election that the future of the state pension is at risk under the Tories."
Mr Hunt last week said he wants to work toward getting rid of NICs altogether within five years. Paul Johnson, director of the Institute for Fiscal Studies, said: "Talk of abolishing national insurance does not look realistic.
"Let's be clear, he is not talking about abolishing national insurance, he is talking about that relatively small part paid by employees. But this pledge to cut taxes by more than £40billion goes in the same bucket as pledges to increase defence spending - not worth the paper its written on unless accompanied by some sense of how it will be afforded."