Tories will not raise national insurance

The Conservative Party will today promise to spare businesses and people on low and middle-incomes from the rise in national insurance contributions (NICs) due next year.

In a landmark announcement that will shape the general election debate, the shadow Chancellor George Osborne will reveal that the 1 per cent rise for employers and employees planned by Labour for next April will go ahead only for high earners if the Tories win power. He will claim that this key tax pledge will leave seven out of 10 working people better off under Tory economic plans than under Labour's.

Mr Osborne and David Cameron have said that halting the NICs increase is their top priority but until now have stopped short of giving a firm promise. The Treasury estimates the proposed rise in NICs will raise about £7bn a year so the Tory pledge is likely to cost less than that.

The move, predicted in The Independent last Friday, will not be funded by other tax rises. Mr Cameron suggested yesterday that it would be met by "savings" his party had identified. He said that the Tories would cut public spending "further and faster" than Labour but insisted there was "a limit" to what could be achieved this year.

Mr Osborne and Mr Cameron, who have been under pressure to spell out more of their tax and spending plans amid a Tory slip in the opinion polls, finalised today's announcement after last week's Budget. Insisting that the new policy is "fully-funded", they will argue that it puts the Tories "on the side of working people and of securing economic recovery". The planned NICs rise would hit people earning £20,000 and above. The Tories hope that halting it for low and middle-income groups will help them answer Labour's charge that they are a "party of the rich".

Mr Osborne will claim that preventing the rise for employers will protect tens of thousands of jobs that would otherwise have been lost. Tory strategists intend to make today's announcement a centrepiece of the campaign. They claim it will "expose the madness of Labour's mistake to jeopardise the recovery by imposing a tax increase on jobs and workers" and give the Tories a strong card to play on safeguarding the recovery and helping families who are struggling to make ends meet.

Mr Osborne will go head-to-head tonight with the Chancellor Alistair Darling and Liberal Democrat Treasury spokesman Vince Cable in a Channel 4 debate. Labour will subject the Tory pledge on NICs to intense scrutiny and is likely to claim that the Opposition's plans do not add up. Yesterday Liam Byrne, the Treasury Chief Secretary, said a raft of recent Tory promises meant they had entirely lost sight of cutting the public deficit.