Jeremy Hunt set to cut national insurance by 2p in UK Budget

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UK chancellor Jeremy Hunt is set to cut national insurance rates by 2p as he puts personal tax reductions at the heart of a pre-election Budget, government officials said on Tuesday.

The move would be worth £450 a year to the average worker and repeat an identical cut in national insurance in last year’s Autumn Statement, benefiting about 27mn employees.

A 2p cut in employee NICs would cost the exchequer about £10bn a year, and the measure is expected to be funded by targeted tax rises, including the axing of current “non dom” rules, and a squeeze on future public spending.

Some Conservative MPs had hoped that Hunt would focus his attention on cuts to income tax, a more easily understood levy and one that Prime Minister Rishi Sunak has repeatedly promised to reduce.

The last 2p cut in national insurance, which hit pay packets in January, failed to move the dial politically. On Monday, polling by Ipsos put Tory support at 20 per cent, the lowest level since the poll began in 1978.

Sunak announced in his last Budget as chancellor in March 2022 that he would cut the basic rate of income tax from 20p to 19p by 2024, proclaiming it would be “a tax cut for workers, for pensioners, for savers”.

Sunak and Hunt concluded that a 2p national insurance cut, first reported by The Times, would reward work and help to boost growth, but it will disappoint some Tory MPs.

“Oh no,” said one backbencher. “He should have gone for income tax. People understand income tax.” NICs cuts benefit workers, while income tax cuts also help people with property income and wealthier pensioners.

Hunt has considered using his Budget to announce cuts to post-election departmental spending plans to help fund personal tax cuts, even though some economists warn they would harm strained public services.

Sunak’s spokesman said on Tuesday the government had boosted investment in public services but that Hunt was not opposed to efforts to increase efficiencies within departments including through the use of new technology such as artificial intelligence. 

“As the chancellor said over the weekend, we don’t accept that one should just focus on spending inputs,” he said. “It’s important that we also look at how we can raise public sector productivity to deliver better outcomes.” 

Greg Hands, trade minister, insisted on Tuesday that there were no plans for Sunak to call a snap general election in May off the back of Wednesday’s Budget.

If Sunak holds an autumn general election, that could allow him to hold a second tax-cutting fiscal event later this year, possibly turning to income tax cuts if the economy improves.

But Jonathan Ashworth, a senior Labour backbencher, placed a £10 bet on Sky News that the election would be held in May, citing increased social media advertising by the Conservatives in recent weeks.

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