The National Insurance cut which millions of Britons have hoped for will take place from November 6, the Government has confirmed.
Liz Truss' key pledge's date was published for the first time, as the Health and Social Care Levy (Repeal) Bill was unveiled in the House of Commons - with Chancellor Kwasi Kwarteng confirming that the NI hike imposed earlier this year by predecessor Rishi Sunak will be reversed within a matter of weeks.
The Government is now set to lower rates of National Insurance from 13.25%, back down to 12% - the figure it stood at prior to the Tory hike in April 2022. The change was expected to come in spring 2023, but has since been brought forward.
Read more: DWP: Six million disabled people to get £150 cost of living payment from today
The Government announced the change will see 28 million across the United Kingdom keep an extra £330 per year each, on average between 2023 and 2024, reports The Mirror. Despite scrapping the levy - a key policy of Rishi Sunak - Ms Truss has pledged to keep spending the £12bn it would have raised, leaving an abundance of questions as to where she will get the funding from.
She has also vowed to funnel the £12bn-per-year - most of which was due to go to the NHS - entirely into stricken social care - leading to further critical warnings of a health funding black hole. The NI cut is one of a string of announcements due in tomorrow's mini-budget, which could also slash Stamp Duty, corporation tax and limits on bankers' bonuses.
All in the same breath, the new PM will launch a crackdown on benefit claimants, threatening sanctions to those who fail to continue to seek work until employed for a minimum of 15 hours per week. Ms Truss has said she is 'unashamed' about pumping growth into the economy despite her policies helping the rich more than the poor - and fears they will fuel inflation.
The November 6 date depends on the Bill being passed by Parliament. MPs will debate all its stages on October 11 before it goes to the Lords. The Bank of England today announced it will hike interest rates to their highest in more than 13 years - and indicated it believes the economy is already in recession.
The Bank's Monetary Policy Committee (MPC) raised rates to 2.25% - their highest since November 2008 - from 1.75%, in an effort to grapple big increases in the cost of living. Analysis has already found the National Insurance cut will give the rich 235 times more than the poor, once employer contributions are included.
The respected Institute for Fiscal Studies said the change will give the poorest tenth just £7.66 a year. By comparison the richest tenth gain £1,801.89. The massive gulf is because National Insurance is now only charged on earnings above £12,570 a year.
That means cutting it does little to nothing for families on minimum wage or who are out of work due to sickness or disability. IFS data suggests the poorest tenth of people will gain £7.66 a year, followed by £37.36 for the second-poorest tenth, then £73.33, £143.52, £247.59, £375.89, £510.59, £695.92, £918.50 and finally £1,801.89 for the richest tenth.
However, this includes the benefit the cut gives to people’s employers, which means workers will gain less.
Meanwhile the IFS today warned most people will be left worse off this year despite the massive package of cost-of-living support. It said soaring prices meant a median earner will be £500 worse off in real terms than they were last year - a cut of around three per cent in their income.
Higher earners would be £1,000 worse - an even bigger percentage drop in their income - while those on low incomes or who are out of work will be 'more shielded', the IFS said. IFS director Paul Johnson said even though tomorrow’s mini-Budget will not be a full budget, it looked set to be the biggest tax giveaway for more than 30 years.
"This will actually, we think, be the biggest tax-cutting fiscal event since Nigel Lawson's budget of 1988," he said.
Liz Truss has raised fears by vowing to slap the cost of her £2,500-a-year cap on average energy bills on the national debt, instead of imposing a windfall tax on oil giants. The IFS warned the Government was putting public finances on an 'unsustainable path' - with borrowing set to hit £100bn a year even after the energy support package has ended.
With debt potentially set on an 'ever-rising path', it said the Government's claim that reducing tax rates would lead to sustained economic growth was 'a gamble at best'. Levelling up secretary Simon Clarke acknowledged there were dangers attached to the Government's approach but insisted there were 'no risk-free options' in the current global crisis.
"Having come straight out of the global pandemic and into the teeth of Russia invading western Europe, these are extraordinary times," he told ITV's Peston programme, adding: "But the real risk I think here lies in us being too passive in the face of those challenges, of accepting that we are in this economic low-growth trap."
Read next:
- Energy companies announce how customers will get £400 rebate this winter
- Money changes due to hit your pocket between now and Christmas
- Child poverty group slams "cruel and catastrophic” benefit cap
- £150 cost of living payment coming this month for people claiming PIP and DLA
- Prepay customers warned they may miss out on £400 energy vouchers
