According to Chancellor Kwasi Kwarteng, the increase in national insurance will be reversed from November 6.
Former chancellor Rishi Sunak announced a tax hike of 1.25 percentage points, which took effect in April, to fund health and social care.
“Taxing development has never worked,” said Kwasi Kwarteng ahead of Friday’s mini-budget. To raise the standard of living for all, we must be unequivocal in developing our economy.
“Tax cuts are key to this – and whether businesses reinvest the freed-up cash into new machinery, lower prices on shop floors or increased staff wages, reversing the levy will help them grow, while allowing the British public to keep more of what they earn.”
The Prime Minister, Liz Truss, said during the Tory leadership election that she intended to scrap the tax hike. According to the Institute for Fiscal Studies, the tax cut would only benefit the poor by 63p a month.
A respected think-tank, on the other hand, estimated that the move would save high-earners £150 a month. According to IFS analysis, the richest tenth of households, earning an average of £108,000, save £1,800 a year.
However, the poorest 10% of households earning an average of £12,000 a year only save £7.66 a year. After a major poll finds that most voters want to raise taxes, the government can spend more on public services.
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According to the British Social Attitudes Survey, 52% of people believe that more of their salary should be given to the Treasury to fund schools, the health service and welfare.
Truss insisted it was “fair” to give tax breaks to wealthy voters and said she was willing to take “unpopular” decisions to help the economy grow.