Conservatives will reverse the bulk of the Government's planned increase in National Insurance by cutting £6bn of "waste" from the public sector, Shadow Chancellor George Osborne announced yesterday.
Mr Osborne said the change will save taxpayers earning between £7,100 and £45,400 up to £150 a year and will save employers money in reduced contributions.
The 1p National Insurance rise on people earning more than £20,000 announced by Chancellor Alistair Darling in 2008 and 2009 is due to come into effect in April 2011 and forms a centrepiece of the Government's programme to rein in Britain's deficit.
The Shadow Chancellor said ministers had already identified in last week's Budget £11bn in wasteful expenditure. But he said Mr Darling did not intend to start cutting this spending until 2011. A Conservative government would begin cutting in 2010, he said.
Mr Osborne said savings on health and overseas aid would be recycled to the front line, while there would be no cuts in Ministry of Defence budgets until a strategic defence review to be held later this year. But he said all other departments would be expected to cut back on waste - covering areas like administration, procurement, energy bills and staff sickness - as soon as the Tories came to office. "Not a single penny will come from the frontline services that people depend on," Mr Osborne told a press conference in Westminster.
Tories say they would reduce the impact of the National Insurance hike by raising thresholds for the levy. Some seven out of 10 workers would end up better off than under Labour plans, while nobody would be worse off, said the Shadow Chancellor.
Mr Osborne said the Tories had recruited two experts who have formerly advised the Government on cutting waste - Sir Peter Gershon and Dr Martin Read - to find savings which could be made in 2010. They identified £12bn in savings which could be made across government spending. The remaining £6bn will come from other departments and will be used to reduce government borrowing - estimated at £167bn this year - in place of the revenues ministers expect to receive from the National Insurance hike.
Mr Osborne said the planned increase in National Insurance contributions would be "a tax rise on almost all jobs".
Accusing Prime Minister Gordon Brown of "taxing the recovery", he branded the National Insurance increase "the economics of the madhouse".
He cited warnings from employers' organisation the CBI that it would be "a serious mistake that will hold back job creation and growth".