Jeremy Hunt Expected to Announce 2p Cut to National Insurance in Budget
In an effort to provide relief to families and stimulate the economy, Jeremy Hunt is expected to announce a 2p cut to National Insurance during his Budget speech. This move follows a similar cut that was announced in the Autumn Statement. The plan, which was first reported in The Times, aims to reduce the burden of taxes on individuals and businesses.
Hunt, who has been under pressure from Tory MPs to cut taxes, believes that reducing National Insurance is a more cost-effective approach compared to cutting income tax. However, some Conservative MPs are concerned that this cut may not be well understood by voters and therefore may not be as politically beneficial. Additionally, they argue that the initial cut to National Insurance did not improve the Conservatives’ political fortunes.
National Insurance contributions are paid by both employees and the self-employed on their earnings, as well as by employers. The amount paid depends on an individual’s salary. The focus of the upcoming cut is expected to be on employees, similar to the previous reduction in the Autumn Statement. A further 2p cut would result in approximately £450 in savings per year for someone earning a full-time salary of £35,000.
There have also been reports suggesting that the Budget may include a headline-grabbing cut to income tax, despite concerns about potential inflation. The Resolution Foundation estimates that even a 1p reduction in the main rate of income tax would cost £7 billion this year.
Hunt attributes the government’s ability to provide tax cuts to the progress made in reducing inflation. He believes that lower taxes lead to higher economic growth, which in turn creates more opportunities and prosperity for individuals and businesses.
However, these tax cuts come at a time when the country is experiencing sluggish economic growth and recently entered into a recession. Chancellor Rishi Sunak has also expressed that his ability to cut taxes is limited due to the rising cost of borrowing.
The Labour Party believes that the government has more room for tax cuts than they have been suggesting and may also consider reducing income tax. However, they argue that these measures cannot undo the economic damage caused by the Conservatives over the past decade. Shadow Chancellor Rachel Reeves accuses the Conservatives of “economic vandalism” and claims that their policies have resulted in a deteriorating economy.
Labour leader Sir Keir Starmer plans to address these concerns when he responds to the Budget. He argues that tax cuts alone do not benefit individuals due to the freezing of tax thresholds, which has resulted in many people paying higher rates of tax than before.
In addition to the expected cut to National Insurance, Hunt plans to freeze fuel duty for another year. Fuel duty has remained unchanged since 2011. He also intends to urge councils to reduce their spending on diversity schemes and consultants. This comes as many councils are struggling to balance their budgets, with Birmingham and Nottingham recently announcing significant cuts to services. The Local Government Association dismisses attacks on diversity schemes as a distraction, emphasizing that councils spend minimal amounts on such projects.
Furthermore, Sunak is considering other measures to raise revenue, including a new tax on vapes and the elimination of non-dom tax status. Non-domiciled individuals are UK residents whose primary tax residence is abroad. Under the current system, they are not required to pay UK tax on overseas income. Labour has pledged to abolish non-dom status and allocate the generated funds to schools and the NHS. However, if they support any tax cuts announced by the chancellor, questions arise regarding how their spending commitments will be financed.
As the Budget approaches, all eyes are on Jeremy Hunt as he prepares to deliver his speech and unveil his plans for tax cuts and economic recovery. The outcome of these measures will undoubtedly have a significant impact on individuals, businesses, and the overall state of the UK economy.