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Jeremy Hunt said he was looking at ways to dispense with national insurance contributions altogether as he battled criticism he was presiding over continued tax rises for the British public.
The chancellor raised the prospect of combining national insurance with income tax in the future, a day after delivering a £10bn a year cut to national insurance contributions for workers at his spring Budget.
Hunt’s 2p cut in employee national insurance came against a backdrop of a rising tax burden overall, driven by frozen thresholds that have dragged taxpayers into higher rate tax brackets.
National insurance is a “tax on work”, Hunt told Sky News on Thursday. “We want to end that unfairness over time . . . I think it is wrong that we tax work twice.”
On the idea of abolishing national insurance outright, which would cost the government an estimated £46bn a year, he said: “We’re not saying this is going to happen any time soon”. He added abolition was “not the only way you can end that unfairness . . . you can merge income tax and national insurance”.
Shadow chancellor Rachel Reeves accused the government of making even “bigger unfunded commitments to tax cuts” than former prime minister Liz Truss by hinting at abolishing national insurance contributions altogether.
She said Hunt had pushed up the tax burden for the British public through “fiscal drag”, which means the average family will be £870 worse off by the end of the decade.
“The government has given with one hand and taken much more with the other,” she told the BBC.
Hunt’s 2p national insurance cut was designed to chip away at Labour’s polling lead ahead of the general election expected later this year. He left the door open for further tax cuts before the election.
The move was funded in part by the proposed abolition of tax perks enjoyed by “non-doms” who are resident in the UK but domiciled for tax purposes overseas — a policy purloined from the Labour party.
The chancellor’s tax and spending plans also assume a tight grip on public expenditure in the next parliament, with public spending per head flat for the rest of the decade, according to the Office for Budget Responsibility.
Conservative MPs have broadly fallen behind the chancellor, saying the Budget represented a measured and “responsible” package, although it was unlikely to drastically change the party’s electoral fortunes.
The Tories are currently trailing the opposition Labour party by about 20 points in the polls.
Analysis by the Resolution Foundation think-tank found that the net tax cuts announced in the Budget were “dwarfed” by an estimated £27bn of tax rises that came into effect last year and £19bn that will come in after the election because of frozen tax thresholds.
Hunt said that his tax cuts were “a start” in reducing the tax burden. “If you want gimmicks, if you want quick fixes that will fail, then I’m not your person,” he added.