For immediate release
The TaxPayers’ Alliance (TPA) has welcomed Rishi Sunak’s proposed income tax cut, with modelling suggesting this could boost growth by £11 billion.
But analysis by the TPA also laid bare the impact of the national insurance rise, with the £11 billion dwarfed by the potential for £38 billion of growth if the national insurance rise were also scrapped at the same time.
The dynamic tax model, which looks at the impact of tax changes on growth, wages, and investments, was produced by economics consultancy Europe Economics for the TaxPayers’ Alliance. Results show that in the event of a 4p cut to income tax, GDP would be £11 billion higher over ten years, also increasing investment by £2 billion. If the cut to income tax were accompanied by the scrapping of the national insurance rise, GDP would be £38 billion higher over 10 years, with average earnings up by £468 a year (£9 a week).
The TaxPayers’ Alliance is calling on both Tory leadership contenders to commit to cutting income tax and national insurance.
Key findings:
- The model compared a ten-year baseline scenario to an altered scenario with an immediate 4p cut to income tax and a further scenario with an immediate 4p cut to income tax and the scrapping of the national insurance rise.
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Impact on GDP:
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GDP would increase by £11 billion, or 0.34 per cent in the event of an immediate 4p cut to income tax.
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GDP would increase by £38 billion, or 1.19 per cent in the event of an immediate 4p cut to income tax combined with the scrapping of the national insurance rise.
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GDP would increase by £11 billion, or 0.34 per cent in the event of an immediate 4p cut to income tax.
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Impact on investment:
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Investment would increase by £2 billion or 0.08 per cent in the event of an immediate 4p cut to income tax.
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Investment would increase by £8 billion or 2.8 per cent in the event of an immediate 4p cut to income tax combined with the scrapping of the national insurance rise.
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Investment would increase by £2 billion or 0.08 per cent in the event of an immediate 4p cut to income tax.
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Impact on average weekly earnings:
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Average weekly earnings would increase by £2 or 0.03 per cent in the event of an immediate 4p cut to income tax.
- Average weekly earnings would increase by £9 or 1.19 per cent in the event of an immediate 4p cut to income tax combined with the scrapping of the national insurance rise.
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Average weekly earnings would increase by £2 or 0.03 per cent in the event of an immediate 4p cut to income tax.
John O’Connell, chief executive of the TaxPayers' Alliance, said:
“A 4p cut to income tax would come as welcome relief, given that living standards are being endlessly squeezed.
“The national insurance rise is severely denting people’s pay packets and stifling investment in jobs, so cutting both taxes would be a silver bullet for boosting growth.
“Both Tory leadership contenders should commit to cutting income tax and national insurance.”
TPA spokespeople are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Media contact:
Elliot Keck
Investigations Campaign Manager, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)
Notes to editors:
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Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
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TaxPayers' Alliance's advisory council.
- The TaxPayers’ Alliance dynamic tax model previously showed that the national insurance rise would lead to the economy being £24 billion smaller over ten years.