The Institute for Fiscal Studies (IFS) has produced evidence suggesting that a complete reversal of the national insurance increase is likely to benefit most those earning more than £100,000 and will barely help the poorest 3 million households. Those in households with an average UK household income of £31,400 will save around £20 a month, while households with an income of £55,000 will save around £58 a month, according to the IFS analysis. Tom Waters, senior research economist at the IFS, told The Times: “Reversing the recent rise in NICs would tend to benefit the richest households more than the poorest, even as a share of their income. the richest 10th, for example, would earn about £1,800 a year, or 1.7% of their income, and the poorest tenth about £7 a year, less than 0.1% of their income. “This is partly just a natural consequence of the existing tax system: those at the bottom of the income distribution don’t pay much in direct taxes, and so it’s hard to cut taxes in a way that makes a big difference to them. “That said, there are more progressive ways to cut tax – increasing Personal Income Tax Benefit, for example, which is currently set to be frozen in cash until March 2025. Of course, boost incentives for people to move to their work”. Kwarteng is expected to announce the reversal of the 1.25 percentage point increase in national insurance in the mini-budget on Friday and could unveil further tax cuts, such as a future income tax cut of 1p or even 2p. He is expected to present his plans without any independent analysis of how it will affect national finances or how it will be paid for. Kwarteng and Liz Truss, the prime minister, also considered new low-tax “investment zones” as part of their drive to promote growth at all costs.
