The Chancellor of the Exchequer, Jeremy Hunt, has stated that he can “rule out” raising the State Pension age in order to support the UK Government's proposal to abolish National Insurance (NI) contributions, but that the strategy will take “a number of Parliaments” to implement.
His statements came after Prime Minister Rishi Sunak promised MPs that State Pension payments would not be reduced to support his plan to eliminate NI contributions.
Chancellor Reveals Plans for National Insurance Reform and State Pension Protection
The NI contribution rate was reduced from 12% to 10% in January, and a further reduction to 8% was implemented on April 6, bringing a large income gain to an estimated 27 million workers across the UK.
In a statement on Tonight with Andrew Marr on LBC on Wednesday, Mr Hunt further explained that there is no timetable for the proposal because the UK Government does not know when it “will be able to afford it,” adding,
“I think it's something that will take a number of Parliaments to achieve, but it does identify the real divide in British politics.”
The Chancellor stated: “‘It is something that we want to do, but we're not fixing a timescale on it because we don't know when we'll be able to afford it. But it's a little bit similar to George Osborne saying in 2010, that he wanted to raise the threshold before which people paid income tax and National Insurance. And indeed, since 2010 we've doubled it. So, it used to be about £5,500. Now it's £12,570.
“So, over 14 years we have made progress. So, I think it's something that will take a number of Parliaments to achieve but it does identify the real divide in British politics.”
He added: “I think it's one of the big myths that there's no big difference between us and Labour, we actually think that we need to bring down the tax burden, because countries like America and Asian countries with lower taxes have higher growth rates.”
On the impact abolishing National Insurance would have on the State Pension, Mr Hunt said: “It is wrong to say that if we reduce National Insurance payments to zero, we would be reducing people's entitlement to the State Pension because we would find another way to protect the contributory principle.
“If we were to succeed over a period of a number of Parliaments in bringing down National Insurance to zero, we would find another way to protect the contributory principle so that everyone would still get what they're entitled to.”
When asked about raising the State Pension age to 75 to support the abolition of National Insurance, Mr Hunt replied: “I can rule this out. This aspiration will have no impact whatsoever on the age at which people are able to claim the State Pension.”
National Insurance Proposal Sparks Political Debate
During Prime Minister’s Questions in Parliament on Wednesday, Sir Keir Starmer argued that the proposed policy would amount to £46 billion and “puts people's retirement at risk”.
Rishi Sunak urged Sir Keir Starmer to “stop scaremongering” after the Labour leader repeatedly sought more details on how the plan would be funded.
Sir Keir asked: “Has he found the money to fund his £46 billion promise to abolish National Insurance?
“Whenever he’s asked about the date of the election or people’s pensions, he acts as if answering straight forward questions is somehow beneath him. But pensioners and those who are planning their retirement deserve better than his contempt for their questions, because if £46 billion was cut from its funding, the value of the State Pension would almost half.”
He went on to say: “So I don’t apologise for asking on their behalf again, whether he will finally rule out cutting their State Pension to fulfil the enormous blackhole in his spending plans.”
The Prime Minister replied: “Of course we can rule that out, and (Sir Keir) should stop scaremongering, because it’s thanks to the Triple Lock that we’ve increased pensions by £3,700 since 2010 and they will rise in each and every year of the next Parliament.
“But it’s Labour that always hits pensioners hard, it is his mentors Blair and Brown that broke their promises, raised pension taxes by £118 billion and delivered an insulting 75p rise in the state pension.”
Sir Keir asked whether Mr Sunak would rule out forcing people to postpone retirement to help fund the plan, citing Conservative peer Lord Frost's prior suggestion that the State Pension age be raised to 75.
Mr Sunak responded: “I’ve answered this multiple times to (Sir Keir), I’m happy to say it again. This is the party that has delivered and protected the Triple Lock.
“But I know, ultimately he is not worried about any of this because we all remember that he’s got his very own personal pension plan. I think we all remember it, indeed it comes with its very own special law.
“It was called the pension increase scheme for Keir Starmer QC, it’s literally one law for him and another one for everyone else.”
