Jeremy Hunt promised a national insurance cut in the autumn statement (Maja Smiejkowska/PA)

The autumn statement provided the biggest cut on record to the amount of national insurance employees pay

By August Graham, PA
16:23 - December 05, 2023

Chancellor Jeremy Hunt claimed that his autumn statement provided the “largest ever tax cut for workers”, while the Treasury said that it was “the largest ever cut to employee and self-employed national insurance”.

Evaluation: Missing context

While it is correct to say that this was the largest single decrease to the part of national insurance that workers pay, there have been larger cuts to both national insurance and income tax in the past.

The Chancellor’s claim of this being the biggest ever cut for workers is predicated on income tax not just affecting workers, while national insurance is only paid by people in work.

The claim is also based on the cut being to the part of national insurance that workers pay. In the past there have been larger cuts to the part of national insurance paid by employers.

The facts

The claim

There are several official versions of this claim.

On X, formerly Twitter, Mr Hunt said he had announced the biggest business tax cut “in modern history” and the “largest ever” tax cut for workers in his autumn statement on November 22.

A graphic posted by the Conservative Party on X used similar language to say it was the “largest ever tax cut for workers from January 2024”.

A tweet from the Treasury said it was “the largest ever cut to employee and self-employed national insurance.”

A press release from the Department for Science, Innovation and Technology, said it was “the biggest tax cut on work since the 1980s.”

The Chancellor said in the Commons he would cut the 12% national insurance rate on earnings between £12,570 and £50,270 to 10%.

He said the two percentage point reduction in the main rate of employees’ national insurance will save someone earning £35,000 more than £450 and the change would benefit 27 million people.

National insurance rate for UK employees
(PA Graphics)

Other changes were made to national insurance for the self-employed.

The evidence

The claim that the autumn statement included the largest cut to national insurance ever appears to be correct, based on records from the Office for Budget Responsibility (OBR).

The OBR’s Policy Measures Database spreadsheet shows the cost or benefit to the Government of tax policies, going back to 1970.

This database showed that, by OBR estimates, the decision in the 1982 budget to reduce the surcharge for national insurance will cost the Treasury around £9.84 billion in the tax year ending March 2028. This makes it the biggest single reduction in the amount of money that the Government gets from national insurance.

The decision in the autumn statement to cut three types of national insurance is set to cost the Treasury around £9.76 billion in the tax year ending March 2028.

This is a little lower than the impact of the 1982 cut but that policy move changed how much national insurance employers paid; the amount taken from workers was not altered, so the Chancellor is not counting that as a tax cut for employees.

The OBR document also shows that there have been 10 cuts to income tax in the past which were larger than Mr Hunt’s latest national insurance cut. The largest of these will cost £41.26 billion in 2028.

However, income tax is levied on more than just workers – pensioners, some benefits claimants and landlords, among others, must pay it and therefore the Chancellor can claim past reductions in that tax were not cuts purely for workers.

Is tax falling?

While the Chancellor did announce big cuts to tax in his autumn statement, overall tax in the UK is increasing.

According to the OBR, the proportion of tax to gross domestic product (GDP) will be 37.7% in the tax year ending 2029.

UK tax burden (as % of GDP)
(PA Graphics)

That is the highest since the Second World War, and 4.5 percentage points above where it was before the pandemic.

Most of the increase is due to income tax revenues, which are rising because the Government has frozen the thresholds where new tax rates begin while nominal wages are rising – this is known as fiscal drag because it “drags” people into paying higher taxes as their wages increase.

Nominal wage growth means that wages are rising, but does not take into account that inflation might be rising quicker than wages.

The frozen thresholds mean that around four million workers who were not paying income tax before because they were not earning enough will start to pay the tax, while three million will be moved onto the higher rate.

According to the Institute for Fiscal Studies, the autumn statement gave back less than £1 for every £4 taken away due to tax threshold freezes since 2021.

Links

Chancellor Jeremy Hunt’s tweet (archived)

HM Treasury tweet (archived)

Conservative Party tweet (archived)

Hansard record of autumn statement (archived)

OBR policy measures database (archived)

Department for Science, Innovation and Technology press release (archived)

Autumn statement 2023 (archived)

Gov.uk page on income tax (archived)

OBR economic and fiscal outlook (archived)

IFS personal taxes and benefits (archived)

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