Sting in the tail

National Insurance cut outstripped by millions being trapped in higher tax band thanks to inflation, warns IFS

- Jitendra Joshi

AVERAGE earners face losing hundreds of pounds and the next government faces unenviable choices over cuts to public spending in light of Jeremy Hunt’s Autumn Statement, experts warned today.

Analysis revealed that what the Chancellor gave away in national insurance deductions — £10 billion as part of a package of tax cuts worth £20 billion — was far outstripped by inflation trapping millions more people in higher income bands.

“Higher than expected inflation has added around £14 billion to the size of that fiscal drag just since March, taking the total to some £50 billion,” said Paul Johnson, director of the Institute for Fiscal Studies. Mr Hunt kept tax thresholds and allowances frozen at current levels, despite surging inflation this year.