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Hunt set to announce national insurance cut in pre-election Budget

05 Mar 2024 4 minute read
The door to number 11 Downing Street, London, the official residence of Chancellor of the Exchequer Jeremy Hunt. Photo Jonathan Brady/PA Wire

Jeremy Hunt looks set to unveil a 2p cut to national insurance as he uses the Budget to woo voters ahead of this year’s general election.

The Chancellor is widely reported to have decided to cut national insurance rather than the more expensive option of a 2p reduction in income tax.

The move comes as he attempts to both revive the British economy and address an opinion poll deficit which suggests Rishi Sunak’s party is on course to be ousted at the election.

Speculation

Downing Street would not be drawn on the prospect of a cut to national insurance, with the Prime Minister’s official spokesman saying: “I’m not going to get drawn on any of the Budget speculation.”

Treasury sources also refused to comment ahead of the Chancellor’s statement on Wednesday.

But The Times said the cut, worth £450 on average, would come in from April and the decision was taken after Mr Hunt decided against reducing income tax.

It said the decision was taken after the fiscal watchdog the Office for Budget Responsibility downgraded the amount of headroom available for delivering tax cuts or spending commitments within the Chancellor’s rule of having debt falling as a share of gross domestic product by 2029.

Experts warned that a 2p reduction in national insurance contributions would not by itself be enough to stop the tax burden reaching record levels by the end of this decade.

Tax rising

The Institute for Fiscal Studies said the measure would not prevent taxes rising to around 37% of GDP by 2028-29.

The Resolution Foundation think tank said the combination of another 2p cut on top of the 2p reduction which came into effect in January would be worth up to £1,500 a year for employees.

But, combined with freezes in the thresholds at which national insurance is paid, it will mean that the biggest net beneficiaries are those earning £50,000, who gain a net £1,200, the foundation said.

Those earning £19,000 or less will actually be worse off overall as they lose more from the threshold freeze than they gain from rate cuts.

The Resolution Foundation said the £20 billion of cuts to employee national insurance are set against the context of around £35 billion of tax rises through the six-year personal tax threshold freeze.

Adam Corlett, principal economist at the Resolution Foundation, said: “There are huge questions about whether Britain can really afford £20 billion of tax cuts this year, given the insufficient outlook for public spending and the need to reduce our national debt.

“But the Chancellor has at least opted for a better approach than cutting income tax rates – prioritising workers who face higher tax rates than landlords and pensioners.

“But, while this is going to be a tax-cutting election year, it is sandwiched between significant past and future tax rises, with the Budget likely to only add to the number of tax increases coming in after the election.”

The Chancellor attended a pre-Budget audience with the King at Buckingham Palace on Tuesday.

The audience is traditionally a private one but, this time, the King was photographed shaking hands with Mr Hunt in the Private Audience Room of the royal residence.

The King is continuing with his official duties as he is treated for cancer.

Cuts

Trade minister Greg Hands insisted the UK is seeing “economic better times coming up” and the spring Budget will reflect that, despite warnings of real-terms cuts to NHS funding in the coming financial year.

A responsible Budget would involve giving people “a bit of a tax break this year” and “still keeping a record amount of funding into public services”, he told Sky News.

Appearing on ITV’s Good Morning Britain, Mr Hands said: “I think we are seeing economic better times coming up and I think the Budget will reflect that.”

The introduction of a national insurance cut in April will fuel speculation about a May general election, but Mr Hands suggested that is not on the cards.

The Prime Minister has indicated his “working assumption” is for polling day to be in the second half of 2024.

The latest round of Budget speculation came as economic think tank the Institute for Fiscal Studies (IFS) said an already-strained health service could face a cut worth £2 billion in day-to-day spending in England – the largest reduction since the 1970s.

Mr Hunt on Monday indicated that a more efficient public sector could give him greater scope for tax cuts.

The IFS urged him to deliver more top-up spending for the NHS in Wednesday’s announcement, rather than hold back extra money until later in the year as he has done previously.


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Karl
Karl
4 months ago

So never getting to retire. A stupid move if true

Mawkernewek
4 months ago
Reply to  Karl

National Insurance isn’t a piggy bank of its own that will pay for your pension, it all goes into the same coffers.

karl
karl
4 months ago
Reply to  Mawkernewek

But with talk of a further increase in retirement age and NI’s natural link to pension. It’s open for abuse by bad politics. I don’t want to pay less tax, that makes most of us poorer as nhs dentists disappear and other public services replaced by profiteering

Jeff
Jeff
4 months ago

Yeah, this pays for stuff. Guess what is going to happen. Then Labour may have to raise it, guess the other Tory benefit here.

Scorched earth policy.

the original mark
the original mark
4 months ago

More smoke and mirrors by the tories in the run up to the general election.

hdavies15
hdavies15
4 months ago

Far better for Hunt and his colleagues to have one last crack at shutting down waste. There is so much of it and most of it is low hanging fruit if they had the inclination to pick it. Cutting , no closing, tax loopholes that are effectively only available to the super rich for starters. Then applying strict cost reduction methodologies to all government contracts even those currently underway. Slash some of the ridiculous bureaucracy that only serves to cover up weakness rather than expose it. Anything called transparency usually has an equal amount of opacity hidden in there somewhere.… Read more »

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