Jeremy Hunt Announces Tax Cuts in Effort to Boost Tory Popularity

Young worker tax relief announced ahead of general election

By Anonymous

Political reports

6 March 2024

Updated 1 hour ago

Jeremy Hunt, the current Chancellor, has unveiled plans to reduce tax paid by workers starting from April in a bid to improve the Tories’ chances in the upcoming general election.

Video caption:

Hunt: Tax receipts are higher because the economy is set to grow

The Chancellor, Jeremy Hunt, has reduced National Insurance by 2p in the latest spring Budget ahead of the upcoming general election. However, the move has been criticized by the Labour party, who say it is a “con” and will leave many workers worse off. Other measures announced in the Budget include increases to child benefit salary thresholds and the introduction of a vaping levy, while non-dom tax status was abolished.

This recent 2p reduction in National Insurance is the second by Chancellor Hunt this year, emphasizing its role in making the tax system fairer and aiming to stimulate the economy. Nevertheless, Labour leader Sir Keir Starmer, while supporting the tax cut, points out that freezes to tax thresholds will lead to some individuals paying more income tax over time, making the impact of the reduction less beneficial to taxpayers. Starmer also highlights that current taxes have reached a 70-year high and many people have suffered from a decline in living standards in recent years.

Pressure has been building on Jeremy Hunt to introduce personal tax cuts as the Tories have been behind in opinion polls in the run-up to the next general election, expected later this year. Hunt’s previous 2p reduction in National Insurance, declared in last year’s Autumn Statement, did not result in the electoral boost desired by Conservative Members of Parliament. There was speculation that the Chancellor might choose to cut income tax to have a bigger impact on public sentiment.

Despite these expectations, the widely-anticipated Budget revealed a significant 2p cut in National Insurance contributions, decreasing the rate from 10% to 8% for employees and from 8% to 6% for the self-employed. In addition, Hunt has expanded eligibility for child benefits, ensuring that around 170,000 families will receive the benefits in full, while increasing the income threshold for withdrawal to £80,000. An average earner with a salary of £35,000 would benefit by around £450 per year from the NI cut, claimed Hunt in an interview with BBC political editor Chris Mason. The Chancellor also expressed his long-term goal of completely abolishing National Insurance when it is economically viable.

Labour has criticized Chancellor Hunt’s tax cuts, arguing that the burden of income tax will still increase for many due to frozen tax thresholds, and highlighting the impact of “stealth” rises in council tax. In the House of Commons, Sir Keir Starmer accused the Chancellor of trying to “give with one hand, take even more with the other,” claiming the public can see through the Tories’ intention. Liberal Democrat leader Sir Ed Davey called the Budget a “last-ditch attempt” by the Conservative Party to hold on to power, stating that it “reeks of desperation.” Davey also added, “Never before have I seen a government deliver weaker public services, higher taxes, and zero growth all at the same time.”

The decision to extend the windfall tax on energy firms has been met with resistance from several Tories, with Energy Minister Andrew Bowie and Scottish Conservative leader Douglas Ross both expressing their disappointment. SNP economy spokesman Drew Henry criticized both the government and the opposition Labour Party for undermining the energy industry. He argued that a “just transition from oil and gas” would not be possible if it damages the sector overnight.

The Budget also touched on public services, with Chancellor Hunt committing to a planned increase in day-to-day spending at 1% above inflation every year until 2029. However, prioritized departments such as health and schools with protected budgets could result in significant budget cuts for other sectors including justice and local government. The Chancellor urged the public sector to improve efficiency to deliver better value for taxpayers. Furthermore, he pledged investments in new technology to streamline workflows for healthcare workers and the police, including a £3.4 billion injection to modernize NHS IT systems.

The government’s independent forecaster, the Office for Budget Responsibility, predicts a fall in inflation to the target rate of 2% before the end of June, suggesting a possible autumn election rather than a poll in May. The economic situation is expected to improve by then, giving another opportunity for tax cuts. The Budget also included several other measures such as the extension of the Household Support Fund for another six months, a freeze on alcohol duty until February 2025, the introduction of a tax on vaping products from October 2026, and the freezing of fuel duty for another year. Tax breaks for owners of holiday let properties are set to be scrapped.

Overall, the Budget aims to boost the Tories’ popularity amid sluggish economic growth and to address some of the concerns raised by the public. Whether these measures and tax cuts will have the desired effect remains to be seen, and voters will have the final say in the imminent general election.