Before he unveiled his main tax cut in the 2024 budget this week, Jeremy Hunt criticised the fact that Britain collects two different types of taxes on earnings: income tax and national insurance contributions (NICs). The system has become too complicated, the chancellor said. It penalises work, he added, thus deterring a high-wage, high-skill economy. He then announced a cut in employees’ NICs by a further 2p, and ended: “Our long-term ambition is to end this unfairness … we will continue to cut national insurance.”
Britain’s tax system is indisputably complicated. The case for clarifying it as far as possible is overwhelming, in part so that it can do the job required in today’s conditions, but also so that it can command the robust public support it demands, especially in populist times. But Mr Hunt is very wrong to caricature NICs as a penalising or reactionary tax. In many ways, NICs are the very opposite.
