Hunt cuts national insurance in pre-election Budget giveaway

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 Labour leader Sir Keir Starmer the keys to No 10.

But as he insisted those with the “broadest shoulders” will 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.

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.

(PA Graphics)

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.

The Office for Budget Responsibility (OBR) said that would result in more than three million more taxpayers, more than two million more higher rate and half a million more additional rate taxpayers by 2028.

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”.

OBR chief Richard Hughes said there was a 46% chance of failing to meet the Chancellor’s rule, and said it also incorporated revenues from future increases in fuel duty – something which has not happened for more than a decade.

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”.

(PA Graphics)

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.

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% in 2026, again slightly higher than previously expected, 1.8% in 2027 – a 0.2 percentage point decrease – while the forecast for 2029 remained unchanged at 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”.

(PA Graphics)

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 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.

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.

(PA Graphics)

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”.

– Advertisement –
– Advertisement –