By Iain Watson
Political correspondent, BBC News
Labour believes it has found a new dividing line with the Conservatives at the next general election – National Insurance.
The party did not oppose new cuts to National Insurance in last week’s Budget.
But the Labour leadership believes they have found a way to turn the tables on the Conservatives when it comes to economic competence.
Labour is still licking its wounds over its £28bn green prosperity plan – a pledge that was diluted last month under sustained attack over how it would be funded.
So, Labour has been quick to attach a price tag – a whopping £46bn – to the Conservatives’ “ambition” to do away with National Insurance.
This is despite Chancellor Jeremy Hunt making clear it would only happen when fiscal and economic conditions allow – and that it could not happen overnight.
Labour’s shadow work and pensions secretary Liz Kendall went on the attack over this new Conservative “ambition” in a speech, ostensibly about pensions, earlier on Wednesday.
She said: “If Labour made a commitment 100 times smaller than this we would rightly be asked to spell out – where is the money coming from?
“Will it be paid for by higher borrowing? Or spending cuts to vital public services?”
These words are not just motivated by a desire for revenge over the beaten and battered £28bn pledge.
Party for pensioners?
Labour held post-Budget focus groups last weekend – and they discovered that these are questions which resonated with key voters.
In addition, there were concerns among the voters that if National Insurance is abolished, funding for the health service and for the state pension could be shakier as a result.
Certainly, National Insurance contributions can determine how much state pension you qualify for.
But previous attempts to “hypothecate” – or earmark – National Insurance contributions for specific public services have been abandoned.
For example, the Health and Social Care Levy on National insurance – proposed by Rishi Sunak when he was chancellor – was scrapped by Liz Truss during her brief spell in Downing Street and never re-introduced.
Nonetheless, confusion and concern over the government’s intentions are not necessarily unhelpful for Labour.
Liz Kendall has declared Labour is now the party for pensioners.
That claim may be a little premature.
But it is certainly Labour’s aim to peel pensioners away from the Conservatives – more than 60% of over 65s backed the Tories in 2019 and whether by post or at a polling station, they are more likely to cast their ballot than younger people.
Triple lock
Some recent opinion polls have suggested there is now a much narrower age gap between the parties’ supporters – due in part to some previous Conservative voters peeling off to Reform UK.
So Labour are going to point out that cuts to National Insurance, unlike income tax reductions or higher tax thresholds, don’t benefit pensioners.
And Labour will stick to the government’s “triple lock” on pensions – ensuring the state pension rises with the highest of three measures: inflation, earnings, or 2.5%.
So, there will be a political dividing line on National Insurance at this year’s general election.
But it is not pre-ordained that the government will lose the argument.
Jeremy Hunt has at least set out a trajectory for lower National Insurance contributions.
These reductions are cheaper than income tax cuts.
But the chancellor has also argued that it is right to target reductions at those who are in work rather than retired, as this is an incentive to get 50 and 60-somethings back in to the workforce.
That, in turn, could help boost the nation’s income and help boost productivity.
But some Conservative MPs believe people neither understand nor give the government credit for National Insurance changes – unlike a cut in headline income tax rates.
So Labour hopes that Conservative concerns and voters’ confusion could pay them political dividends.
