“[These are] changes that make our system simpler and fairer and changes that grow our economy by rewarding work.”
The changes will take effect on April 6, and, according to the chancellor, will mean 200,000 more people will be in work, adding 0.4 per cent to GPD from both national insurance cuts combined.
National insurance was already cut for both the self-employed and employed workers in Hunt's latest Autumn Statement, when he cut the main rate of employee national insurance to 10 per cent from January, down from 12 per cent, and abolished class two national insurance payments paid by some 2mn self-employed people, effective from April.
A cut to class four national insurance contributions by 1 percentage point to 8 per cent will also come into effect from April.
But it has been dubbed a stealth tax, as the chancellor is seen to be giving with one hand and taking with the other in a way which may not be immediately obvious.
Income tax thresholds for instance remain in deep freeze, meaning many more workers who have received a pay rise – substantial in many cases due to last year's high inflation – might have been pushed in a higher tax bracket than they would have been had the tax bands risen with inflation.
The national insurance cut is also cheaper than an income tax cut would have been, as it does not affect pensioners or income from property.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: "This April we’ll see another freeze in the personal allowance and the higher rate tax threshold, which the OBR says will see 1.1mn more people dragged into paying income tax and 800,000 more forced to pay higher rate tax.
"It means we can’t look at a national insurance saving in isolation. We’re still locked into a freeze that means over time we’re going to see our tax bills continue to rise. And because more of the benefit of cuts goes to higher earners, those on lower earnings will suffer particularly.
"When you factor in both the national insurance cut and the tax threshold freezes, those earning less than £19,000 will actually be worse off."
Justin Corliss, technical manager at Royal London, says: “With national insurance rates consistent across the UK, a second reduction in a matter of months is an obvious way for the government to reach all of those in employment, in particular lower earners.
“This will obviously not be as popular a decision among pensioners as income tax cuts may have been, as only those who are working and under state pension age pay national insurance.
