Newly appointed Chancellor Jeremy Hunt has today announced the reversal of almost all tax cuts announced by his predecessor except National Insurance (NI).
Speaking this morning (17 October), Mr Hunt confirmed that the previously announced reversal of the National Insurance increase and scrapping of the Health and Social Care Levy will both go ahead.
Former Chancellor Kwasi Kwarteng announced last month that the Health and Social Care Levy, which was due to come into force in April 2023, would be scrapped, and the 1.25% rise in NI would be reversed on 6 November.
Other tax policies planned by Kwarteng – including cutting the basic rate of income tax, cutting dividends tax, and repealing reforms to IR35 – will now not be taken forward.
Although the Government still plans to cut the basic rate of income tax ‘in due course’, a Treasury statement said this would ‘only take place when economic conditions allow for it and a change is affordable’.
Mr Hunt, the former longest-serving health secretary, was named as Chancellor last week after Kwarteng was sacked from the post, following economic turmoil resulting from the tax-cutting mini budget.
The Health and Social Care Levy first came into force in April as a 1.25 percentage point rise to NI to help fund the NHS, health, and social care.
NI was set to return to 2021/22 levels after a year to be replaced by the levy as a separate tax. It was announced by then Prime Minister Boris Johnson in 2021 to help frontline services.
In his statement today, Mr Hunt said that the UK’s public finances ‘must be on a sustainable path into the medium term’.
The Chancellor is expected to announce further changes to fiscal policy on 31 October.
Responding to the plan, Matthew Taylor chief executive of the NHS Confederation, said: ‘Latest calculations from the Institute for Government show that most services do not have enough funding to return to pre-pandemic levels and this includes current hospital spend which will not drive down pandemic accrued backlogs as well as insufficient investment in primary care to meet demand.’
He noted that this is ‘coupled with the Government’s own recent unfunded NHS staff pay rise which will also mean additional cuts to health service budgets’, adding that ‘the Chancellor really will need to level with the public about the impact of further cuts on the NHS’.
And Saffron Cordery, interim chief executive of NHS Providers, said: ‘As a former health and social care secretary and select committee chair Jeremy Hunt understands better than most the pressures on NHS staff and budgets in the face of ever-growing demand.’
She added: ‘Budgets are already cut to the bone with a pressing shortage of capital investment to ensure buildings are safe and effective. Trust leaders have to make tough choices every day due to soaring inflation and high energy bills. Nationally NHS budgets are also under pressure due to inflation, the cost of NHS staff pay awards not fully funded by the government and less financial support to cope with the impact of Covid-19.’
A version of this story appeared on our sister title, Pulse.