The increase in national insurance will be reversed from 6 November | National insurance

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The National Insurance increase introduced by Boris Johnson’s government will be reversed from November 6, Quasi Quarteng has announced.

Ahead of his mini-budget on Friday, the chancellor confirmed he was cancelling increase of 1.25 percentage points charged by his predecessor, Rishi Sunak, to pay for social care and deal with the NHS backlog.

Kwarteng said he would also scrap the planned health and social care levy, due to come into force next April to replace the national insurance increase.

The government tabled legislation in the Commons on Thursday to pass the tax changes. Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about the growth of our economy.

“Cutting tax is essential to this – and whether businesses are reinvesting freed-up cash in new machinery, lower shop floor prices or increased wages for staff, the rollback of the tax will help them grow while giving the UK public opportunity to keep more of what they earn.”

The Treasury said most employees would receive a reduction in their National Insurance contributions directly through their employer’s payroll in their November pay, although some may be delayed until December or January.

The levy was expected to raise around £13bn a year to fund social care and deal with the NHS backlog built up by the Covid pandemic.

However, Kwarteng said funding for health and social services would be maintained at the same level as if it were still in place.

Graphic showing annual financial benefits of National Insurance increases reversion to households of different incomes

The Chancellor and Liz Truss have argued that the lost revenue will be recovered through higher economic growth stimulated by tax reductions. But as Kwarteng also prepares to scrap a planned rise in corporate tax, some economists have warned of a sharp increase in government borrowing.

The Institute for Fiscal Policy Studies said the plan to drive growth was “at best a gamble” and that ministers risked putting public finances on an “unsustainable path”.

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