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Reports confirm Tory desire to cancel NI increase - but how much will it cost and how will it be funded?

Cameron and Osborne Yesterday Tim asserted that the Conservatives would pledge to call a halt on the 1% rise in National Insurance Contributions Labour have planned to take effect in 2011 - and reports in today's newspapers also confirm this intention.

However, there is disagreement as to how much this will cost  - and indeed the question remains as to how it will be funded.

The Independent reports:

"It would deprive an incoming Cameron government of about £7bn a year of revenue and, to have a credible platform, the party would have to spell out how that would be found.  Mr Cameron and the shadow Chancellor George Osborne have said that halting the 1 per cent increase in NICs is their top priority but have said they cannot guarantee to do so. It is due to take effect in April 2011.

"Conservative insiders said yesterday that following Wednesday's Budget, the party leadership appeared increasingly confident of being able to make such a pledge. Various options for how to pay for it are said to be under consideration. Officially, the party insisted that no decision had been made. "We are straining every sinew to do it – but we are not there yet," said one source."

But the Times puts an even bigger figure on the cost of cancelling the rise in NICs:

"An incoming Tory chancellor would have to find nearly £10 billion to fill the hole that the cancellation would leave. David Cameron and Mr Osborne want to cancel the increases but any move not fully costed would prompt claims that they were preparing to raise VAT. Options include cancelling half the planned rise, or to relieve employers but not employees, or vice-versa.

"The party’s leadership issued private reassurance that it could fund the reversal of national insurance. It is understood that Mr Osborne wanted to delay costing until after the Budget for fear it would be stymied by Mr Darling."

10.15am update:

I am directed to the Treasury's tax ready reckoner from December 2009, which suggests that the cost would actually be more like £5 billion, according to the third line of this table:

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Jonathan Isaby

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