Think tank proposes £6bn tax switch on National Insurance to fund defence

Summarised from 2 outlets · Updated 13 Oct, 00:20 · Archive

The Resolution Foundation proposes cutting National Insurance by 2p in the pound and raising income tax equivalently to raise £6 billion.

The Resolution Foundation, a think tank with close links to Labour, has proposed a major tax switch ahead of the Budget to raise £6 billion for defence spending. The proposal would cut National Insurance contributions by 2p in the pound for all workers whilst increasing income tax by the same amount amount. Because more people pay income tax than National Insurance, the overall amount collected would be higher by £6 billion, the think tank says.

Most employees' take-home pay would remain roughly the same under the switch. However, it would disadvantage those with other forms of income, including landlords with rental properties and those receiving dividends. Retired people with private pension income could also be worse off.

The think tank acknowledged the proposal 'may be controversial' but argued that 'if major new expenditure is to be funded, then somebody is going to have to pay for it'. It suggested announcing such a move would help 'rebuild confidence in our public expenditure'. The Resolution Foundation previously proposed a similar National Insurance to income tax switch ahead of last year's Budget.

How it is being reported

• Think tank with close links to Labour suggests major tax change to raise £6billion for defence spendingThe Resolution Foundation, a think tank with close links to Labour, has proposed cutting National Insurance contributions by 2p in the pound for all workersThe Mirror · 13 Oct, 00:03
• Labour's favourite think-tank backs £6bn tax raid on pensioners and landlords to fill 'huge hole' in public financesIn a report two weeks before the Budget, the Resolution Foundation also suggests targeting homeowners, banks, and wealth.This is Money · 13 Oct, 00:01

In this story: Resolution Foundation · Labour · John Healey

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