Conservatives Plan to Reduce National Insurance, but No Mention of Increased Childcare Funding

Conservatives Plan to Reduce National Insurance, but No Mention of Increased Childcare Funding

Prime Minister Rishi Sunak has said that if re-elected, the Conservatives will reduce employee National Insurance by 2p by April 2027, but they have not committed to increasing early years funding or addressing child poverty. 

The Conservatives have also pledged to support the self-employed by entirely abolishing the main rate of self-employed National Insurance. This would impact over 27,000 childminders in the UK. Under a Conservative Government, National Insurance would eventually be abolished completely when ‘financial conditions allow’. 

According to the Institute for Fiscal Studies (IFS), the reduction in the main rate of National Insurance contributions for employees would be around £450 per year to someone earning the national average salary of around £35,000 per year. However, they would lose £150 due to continued freezes to income tax and National Insurance contributions thresholds. Research within the childcare sector has consistently indicated most childcare professionals earn considerably less than these amounts.

The IFS warned that abolishing the main rate of self-employed National Insurance contributions would ‘further entrench’ the tax advantages of self-employment over employment. 

A spokesperson for the Social Market Foundation said that National Insurance cuts should lead to a merger with income tax to ensure that workers are not disadvantaged. Otherwise, they said, cutting self-employed National Insurance contributions more than employee National Insurance contributions will cause the tax bias against employment to worsen.

The Conservatives manifesto includes measures previously announced by the party, including the provision of 30 hours of ‘free’ childcare for children from nine months old to school-age from working households by September 2025; and reform of the Child Maintenance Service. These policies have been broadly welcomed, but questions remain over their feasibility.