Rishi Sunak should cut national insurance and make investment relief permanent, think tank report argues

Prime Minister Rishi Sunak and Chancellor Jeremy Hunt should cut national insurance contributions for businesses and make the temporary tax break for business investments permanent, an influential think tank has argued in a radical scheme to overhaul the UK’s tax system.

Employers must be subject to a national insurance tax of 12.8 percent, one percentage point lower than the current rate, according to a report released today from Resolution.

The think tank claimed that reducing reliance on generating tax revenue from profits would stimulate employment and help the UK reverse its stagnant economic growth for more than a decade.

The report argues that making the current 100 percent tax exemption permanent would incentivize companies to increase capital spending and create more opportunities for GDP growth to flourish.

Britain’s tax burden – tax revenue as a share of output – is heading for 38 per cent in five years, its highest level just since World War Two, up from 33 per cent on average over the past two decades or so. .

That would amount to approximately £4,200 tax increase per household.

As a result, policymakers need to focus on introducing a more efficient tax system to justify the Treasury taking a larger share of voters’ incomes.

“This increased amount of tax revenue has not been matched by a rise in the quality of tax policy,” said Adam Corlett, chief economist at Resolution Corporation.

He added, “Britain’s tax system needs an overhaul so that it focuses on helping rather than hindering economic growth, reducing inequality and creating a level playing field.”

The report said politicians must stop chopping and changing tax policy or risk stifling business growth, innovation and employment.

Last year, former prime minister Liz Truss launched the biggest tax-cutting budget since 1972, only for nearly all of her measures now abandoned by Chancellor Jeremy Hunt a month or so later after the package sent financial markets jittery.

In 2021, Boris Johnson and Snack raised National Insurance rates by 1.25 percentage points. The move was canned by Truss on entry to #10.

“Fiscal volatility and manipulation were so common, reform was often lined up,” said Resolution, adding that MPs decided to “pretend that a great era of tax cuts is about to happen” rather than focus on “improving the economic efficiency, fairness and predictability of the system.” tax.”