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Tories make Nat Insurance pledge Tories make Nat Insurance pledge
(10 minutes later)
The Tories have outlined plans to block some of next year's planned National Insurance tax rises.The Tories have outlined plans to block some of next year's planned National Insurance tax rises.
Shadow chancellor George Osborne said the plan would benefit anyone earning up to £45,400, although the new rate would apply to higher earners.Shadow chancellor George Osborne said the plan would benefit anyone earning up to £45,400, although the new rate would apply to higher earners.
Describing Labour's tax rise as "the economics of the madhouse", he said seven out of 10 workers would be better off if the Tories won the election.Describing Labour's tax rise as "the economics of the madhouse", he said seven out of 10 workers would be better off if the Tories won the election.
Labour say National Insurance is one of many Tory plans as yet unfunded.Labour say National Insurance is one of many Tory plans as yet unfunded.
Mr Osborne said the Tories had identified £12bn of savings that could be made by government departments.Mr Osborne said the Tories had identified £12bn of savings that could be made by government departments.
Some £6bn could be made in 2010-11, he said, to make a start in reducing government borrowing.Some £6bn could be made in 2010-11, he said, to make a start in reducing government borrowing.
A further £6bn of savings would also be made in the Departments of Health and International Development - but would be re-invested in the front line - and in the Ministry of Defence, although not until the next financial year.A further £6bn of savings would also be made in the Departments of Health and International Development - but would be re-invested in the front line - and in the Ministry of Defence, although not until the next financial year.
Last week, Labour identified £11bn of savings, but said they aimed to implement them by 2012-13 and warned of the dangers of making cuts too soon.Last week, Labour identified £11bn of savings, but said they aimed to implement them by 2012-13 and warned of the dangers of making cuts too soon.
Raising thresholdsRaising thresholds
In the party's first major tax-cutting pledge in the run-up to the election expected on 6 May, the Tories announced they would pay for the billions of pounds in lost National Insurance by cancelling some projects in this financial year while pledging to reduce waste and cut the cost of procurement.In the party's first major tax-cutting pledge in the run-up to the election expected on 6 May, the Tories announced they would pay for the billions of pounds in lost National Insurance by cancelling some projects in this financial year while pledging to reduce waste and cut the cost of procurement.
Mr Osborne said: "Labour will kill the recovery with their tax on jobs. We will cut Labour waste to stop it.Mr Osborne said: "Labour will kill the recovery with their tax on jobs. We will cut Labour waste to stop it.
"No-one can seriously argue that tackling waste is somehow going to damage the economy.""No-one can seriously argue that tackling waste is somehow going to damage the economy."
NATIONAL INSURANCE Pays for a number of benefits including the state pensionEmployees earning more than £110 a week must pay NI. Those earning more than £844 a week pay a higher rate. Employers also make contributions for each employee and the self-employed pay according to their profits.Under Labour, contributions for both employees and employers would increase by 1% from April 2011 Tories would scrap the rise for employees earning up to £35,000. Employers would also see no rise for staff earning £20,800 or less. NATIONAL INSURANCE Pays for a number of benefits including the state pensionEmployees earning more than £5,720 a year must pay NI at a rate of 11%. Those on more than £43,888 a year pay 11% on earnings up to that level and 12% on anything above it.Employers also make contributions for each employee and the self-employed pay largely according to their profits.Under Labour, contributions for both employees and employers would increase by 1% from April 2011 Tories would scrap the rise for employees earning up to £35,000. Employers would also see no rise for staff earning £20,800 or less.
Mr Osborne said that under Tory moves the impact of the NI hike would be offset by raising thresholds for the levy.Mr Osborne said that under Tory moves the impact of the NI hike would be offset by raising thresholds for the levy.
For employees earning up to £35,000, the threshold would rise by £24 a week, while the upper earnings limit for contributions would increase by £29 a week.For employees earning up to £35,000, the threshold would rise by £24 a week, while the upper earnings limit for contributions would increase by £29 a week.
He said that as a result, relative to Labour's plans, employees earning between £7,100 and £45,400 would be saved up to £150 a year.He said that as a result, relative to Labour's plans, employees earning between £7,100 and £45,400 would be saved up to £150 a year.
Those earning more than £45,400 would see the proposed National Insurance increase come in as planned by Labour, the Tories added.Those earning more than £45,400 would see the proposed National Insurance increase come in as planned by Labour, the Tories added.
Under the Tories, employers would also not face an increase in contributions for staff earning up to £20,800.Under the Tories, employers would also not face an increase in contributions for staff earning up to £20,800.
To do this, the threshold at which employers start making contributions would rise by £21 a week, a move Mr Osborne said would save them up to £150 for every person they employ relative to Labour.To do this, the threshold at which employers start making contributions would rise by £21 a week, a move Mr Osborne said would save them up to £150 for every person they employ relative to Labour.
The Tories said the independent think tank the Institute for Fiscal Studies had put the cost of the move at £5.6bn in 2011-12. Over time, the IFS estimated that higher wages in response to the cut in employers' contributions would reduce the net cost to £4.3bn.The Tories said the independent think tank the Institute for Fiscal Studies had put the cost of the move at £5.6bn in 2011-12. Over time, the IFS estimated that higher wages in response to the cut in employers' contributions would reduce the net cost to £4.3bn.
Chancellor Alistair Darling announced two 0.5% increases in National Insurance to take effect in April 2011 - one in his 2008 pre-Budget report and one in 2009.Chancellor Alistair Darling announced two 0.5% increases in National Insurance to take effect in April 2011 - one in his 2008 pre-Budget report and one in 2009.
They are central to the government's plans to cut the budget deficit.They are central to the government's plans to cut the budget deficit.
'Control recruitment''Control recruitment'
Shadow chief secretary to the Treasury Philip Hammond said the Tories had identified five immediate steps that could be taken to save £6bn in public sector costs in 2010-11:Shadow chief secretary to the Treasury Philip Hammond said the Tories had identified five immediate steps that could be taken to save £6bn in public sector costs in 2010-11:
  • Halt spending on major new IT projects and cancel any existing ones that were not worth completing
  • Negotiate significant cost reductions in the contracts held by government departments with major suppliers
  • Control recruitment by closing some back office and support roles when they become empty
  • Cut back on discretionary spending such as expenses, travel, consultancy and office consumables
  • Reduce public sector property costs by vacating space and cutting the running costs of buildings
  • Halt spending on major new IT projects and cancel any existing ones that were not worth completing
  • Negotiate significant cost reductions in the contracts held by government departments with major suppliers
  • Control recruitment by closing some back office and support roles when they become empty
  • Cut back on discretionary spending such as expenses, travel, consultancy and office consumables
  • Reduce public sector property costs by vacating space and cutting the running costs of buildings
Mr Osborne said "not a single penny" of the £6bn "will come from the frontline services that people depend on".Mr Osborne said "not a single penny" of the £6bn "will come from the frontline services that people depend on".
He claimed the chancellor scored a political own goal in this month's Budget, when he announced there were billions to be saved in so-called efficiencies, whilst insisting it would be wrong to spend less now.He claimed the chancellor scored a political own goal in this month's Budget, when he announced there were billions to be saved in so-called efficiencies, whilst insisting it would be wrong to spend less now.
But the BBC's economics editor Stephanie Flanders said Mr Hammond's claim there was "no plan to cut jobs" with these savings was "disingenuous" because "if you don't fill vacancies... real people who would have been on the public sector payroll will not be".But the BBC's economics editor Stephanie Flanders said Mr Hammond's claim there was "no plan to cut jobs" with these savings was "disingenuous" because "if you don't fill vacancies... real people who would have been on the public sector payroll will not be".
This could trigger an intriguing political role reversal Nick RobinsonBBC political editor Read Nick's thoughts in fullThis could trigger an intriguing political role reversal Nick RobinsonBBC political editor Read Nick's thoughts in full
A spokesman for Mr Darling said the Tories' pledge would "put families and business at risk".A spokesman for Mr Darling said the Tories' pledge would "put families and business at risk".
"It's paid for on a wing and a prayer. The public won't be fooled by this."It's paid for on a wing and a prayer. The public won't be fooled by this.
"The £28bn they'd need to find would have to come from deeper cuts or other tax rises.""The £28bn they'd need to find would have to come from deeper cuts or other tax rises."
The debate over NI is likely to feature when Mr Osborne, Mr Darling and Liberal Democrat economics spokesman Vince Cable go head-to-head on Monday night in a live debate on Channel 4.The debate over NI is likely to feature when Mr Osborne, Mr Darling and Liberal Democrat economics spokesman Vince Cable go head-to-head on Monday night in a live debate on Channel 4.
In January, two business groups urged the government to scrap the rise in national insurance, arguing it could endanger the economic recovery.In January, two business groups urged the government to scrap the rise in national insurance, arguing it could endanger the economic recovery.
The British Chambers of Commerce (BCC) and the Chartered Institute of Personnel and Development (CIPD) said business would suffer from the extra financial burden which will hit any upturn in the labour market.The British Chambers of Commerce (BCC) and the Chartered Institute of Personnel and Development (CIPD) said business would suffer from the extra financial burden which will hit any upturn in the labour market.
David Frost, director-general of the BCC, said Tory plans were "an important step in the right direction".David Frost, director-general of the BCC, said Tory plans were "an important step in the right direction".
"However, the job is not yet done. Despite these positive proposals, companies up and down the country will still face higher costs to keep people in work from April of next year."However, the job is not yet done. Despite these positive proposals, companies up and down the country will still face higher costs to keep people in work from April of next year.
"To secure the recovery, we must completely eliminate this damaging tax on jobs.""To secure the recovery, we must completely eliminate this damaging tax on jobs."