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Hunt cuts national insurance in pre-election Budget giveaway

06 Mar 2024 5 minute read
Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street, London, with his ministerial box before delivering his Budget. Photo Stefan Rousseau/PA Wire

Jeremy Hunt cut personal taxes to their lowest level for almost 50 years in a highly political Budget ahead of this year’s general election.

The Chancellor confirmed a 2p cut in national insurance for employees and the self-employed as the centrepiece of a Budget which sought to persuade voters to stick with the Conservatives rather than give Sir Keir Starmer the keys to No 10.

Child benefits

Mr Hunt also offered more help with child benefits to parents earning more than £50,000 and cut the top rate of capital gains tax on property sales – arguing that reducing it from 28% to 24% would bring in more money because of increased activity.

But as he insisted that those with the “broadest shoulders” would pay more, he committed to scrapping the non-dom status for wealthy foreigners, putting the £2.7 billion a year raised as a result towards tax cuts.

The national insurance cut from April will be worth an average £450 for workers and £350 for the self-employed.

Reduction

When combined with a previous reduction which came into effect in January it will be worth £900 for 27 million workers and £650 for two million self-employed.

Mr Hunt said: “That means the average earner in the UK now has the lowest effective personal tax rate since 1975 and one that is lower than in America, France, Germany or any G7 country.”

But the changes come against a backdrop of frozen thresholds which will see more people dragged into tax or higher brackets as their earnings rise.

Post-war high

The budget watchdog said that, despite the national insurance cuts, tax as a share of gross domestic product (GDP) – a measure of the size of the economy – is “rising to near to a post-war high”.

The Office for Budget Responsibility (OBR) said the package of measures means Mr Hunt is meeting his rule of having national debt falling as a share of GDP in 2028-29 by a “historically modest margin” of just £8.9 billion.

The Chancellor told MPs that, by delivering on Prime Minister Rishi Sunak’s economic priorities, “we can now help families not just with temporary cost-of-living support but with permanent cuts in taxation”.

Mr Hunt said inflation is set to fall to below the Bank of England’s 2% target “in a few months’ time”, easing the cost-of-living squeeze.

But he also set out a series of measures aimed at offering “much-needed help in challenging times”, including:

– Changing the way child benefit is treated, with the individual earnings threshold at which it is taxed increasing from £50,000 to £60,000 from April, with people getting at least some help until they earn £80,000.

– Freezing fuel duty and extending the “temporary” 5p cut for a further 12 months.

– A freeze in alcohol duty to February 1 2025.

– Extending the Household Support Fund with an extra £500 million.

GDP

Mr Hunt also said GDP is set to grow faster than previously forecast by the budget watchdog.

The OBR forecast growth of 0.8% in 2024, up from the 0.7% forecast in November, and 1.9% next year – up from 1.4% on the autumn forecast.

Growth is expected to be 2.2% in 2026, again higher than previously expected, 1.8% in 2027 – a 0.2 percentage point decrease – while the forecast for 2029 remained unchanged on 1.7%.

“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Mr Hunt said.

The Chancellor said he will maintain his plan to increase public spending by 1% a year over the course of the next parliament, although the OBR said the plans “imply no real growth in public spending per person over the next five years”.

Mr Hunt pledged to increase public sector productivity, including a package of NHS reforms which will “slash the 13 million hours lost by doctors and nurses every year” as a result of obsolete IT systems with a £3.4 billion investment.

He also promised an additional £2.5 billion for the NHS to “meet pressures in the coming year”.

Other changes to emergency services could include using drones as “first responders” to incidents “where appropriate”, as part of a £230 million plan to roll out new technology to speed up police response times, which could also allow victims to report crimes by video call.

The Chancellor confirmed he will replace the current non-dom tax regime with a “modern, simpler and fairer residency-based system”.

The move lays a trap for Labour which had promised to scrap the status and put the money into public services including the NHS, rather than directing it towards tax cuts as Mr Hunt has done.

For businesses, Mr Hunt increased the threshold at which small firms have to register for VAT from £85,000 to £90,000.

He also announced measures aimed at supporting investment in tech firms by unlocking pension fund investment.

ISA

And he confirmed a new British ISA will allow an extra £5,000 of tax-free investment in UK assets.

The Chancellor also offered more than £1 billion in extra tax breaks for the creative industries over the next five years.

Tax rises announced by Mr Hunt included a widely-anticipated levy on vaping from October 2026 and an increase in tobacco duty which will raise £1.3 billion by 2028/29.

He also announced the abolition of some property tax breaks, with multiple dwellings relief to be scrapped from June, raising £385 million a year, and the furnished holiday lettings tax regime abolished from April 2025, raising £245 million a year.

With the Tories trailing Labour in opinion polls by around 20 points, Mr Hunt took aim at Sir Keir’s party, saying voters face “a plan to grow the economy versus no plan, a plan for better public services versus no plan, a plan to make work pay versus no plan”.

But Sir Keir said the Budget was the “last desperate act of a party that has failed”.


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Mab Meirion
Mab Meirion
1 month ago

He is smiling now but one of these days he will have his collar felt, if not by the law, then by the grim reaper* and his interview with Saint Peter will be worth putting on TikTok…

*or Jack Reacher / Alan Ritchson…

Jeff
Jeff
1 month ago

Early GE then? No way this passed the sniff test and letting it run means they are found out.

Hows peoples council tax and others costs going.

Barry Pandy
Barry Pandy
1 month ago

Well I’m certainly going to enjoy the extra 90p per week that I’m going to get. Not.

Steve Duggan
Steve Duggan
1 month ago

So they think that by finally giving something to us we’ll give something back to them, probably in the autumn. There’re going to be in for a shock. Besides the failed attempt at trying to buy us – who do tax cuts really benefit? Certainly not the poor or struggling NHS services, only the well off. Hopefully, Hunt will be collecting his P45 with the rest of them later this year.

Linda Jones
Linda Jones
1 month ago

Hunt is one nasty piece of work in my opinion. A budget that will benefit the better off with nothing for those struggling or going hungry/homeless. I hope it catches up with him and he loses his seat at the next election.

Peter Cuthbert
Peter Cuthbert
1 month ago
Reply to  Linda Jones

The election may throw him out of his constituency, but do remember that he will now get a fat minister’s pension for the rest of his life. Ministers are enrolled in a defined benefit pension scheme which means that they will probably get about 1/3 to 1/2 of their final pay rate subject to the number of years they have been a minister. So if he is on £80k at the election, he can expect to retire on somewhere between £27- £40k. Of course, all this ignores the ‘side cash’ that he will have picked up and stashed away through… Read more »

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