Budget 2024: Jeremy Hunt cuts National Insurance again as election looms

  • By Paul Seddon and Becky Morton
  • Political reporters

Video Caption,

Hunt: Tax revenues are higher because the economy will grow

Jeremy Hunt has announced cuts to the tax workers will have to pay from April, in a bid to revive Tory fortunes ahead of this year’s election.

In the last spring budget before the election, the Chancellor cut national insurance by a further 2p in the pound, matching an earlier cut in January.

He said it would make the tax system fairer and revive the British economy.

But Labor called the announcement a “scam” and many people would still be worse off.

Leader Sir Keir Starmer said he supported the cut but it would not offset the freeze on tax thresholds, which will see some people pay more income tax over time.

He added that taxes were at their highest level in 70 years and that people had taken an “unprecedented hit” to their living standards in recent years.

Hunt has been under pressure to cut personal taxes, with the Tories heavily behind Labor in the polls ahead of the next general election, expected to take place later this year.

The National Insurance cuts in January, announced in last year’s Autumn Statement, did not result in the rebound in the polls that Tory MPs desired.

It had fueled speculation in the run-up to the Budget that the Chancellor would opt to cut income tax, which was expected to have a greater political impact on voters.

But despite this, he announced a widespread 2p cut to National Insurance (NI), reducing the rate paid by employees from 10% to 8%, and from 8% to 6% for the self-employed.

He also extended child benefit entitlement to around 170,000 families, with people earning up to £60,000 receiving full benefits and the threshold to waive them fully raised to £80,000.

Mr Hunt said the move to NI would be worth £450 a year for an employee with an average salary of £35,000.

In an interview with the BBC’s political editor Chris Mason, he added that his long-term ambition was to abolish National Insurance completely, but this would only happen if it was “affordable”.

The party had set aside extra income from the policy to pay for new breakfast clubs and extra hospital appointments.

Labor has been keen to emphasize that freezing the thresholds when people start paying income tax, planned until 2028, means the tax burden will still rise for many, also pointing to ‘stealthy’ council tax increases.

Speaking in the House of Commons, Sir Keir said the chancellor was trying to “give with one hand and take more with the other”.

He added: “The whole country can see exactly what is happening here. They know a Tory crook when they see one.”

Liberal Democrat leader Sir Ed Davey called the budget a “last ditch attempt by the Conservative Party to cling to power”, adding that it “smacks of desperation”.

“Never before have I seen a government deliver weaker public services, higher taxes and zero growth at the same time,” he added.

Former ministers Suella Braverman and Sir David Davis both expressed regret that the chancellor had not chosen to cut income tax.

Ms Braverman, who was sacked by the Prime Minister last year, also said frozen income tax thresholds had resulted in “millions of low- and middle-income workers paying higher taxes”, while “unprecedented levels of low-paid, low-skilled worker migration” were harmful to the economy.

“The government could have solved both problems today, but did not,” she said.

Tax threshold changes

The Institute for Fiscal Studies, a think tank, says the combined effect of both NI cuts and the threshold freeze between 2021 and April this year means those earning between £26,000 and £60,000 will be better off .

However, people earning less than £25,000 are worse off, while those earning £60,000 to £120,000 will see little difference.

As well as making changes to child benefit thresholds, the chancellor said he would discuss moving to a system that uses household income instead of individual income by April 2026.

The current system has been criticized as unfair because the threshold is based on the highest-earning parent, rather than a family’s combined salary.

That means a family where two parents each earn £50,000 could receive the full amount, while a single person earning £60,000 would get nothing.

‘Around the corner’

The budget comes against a backdrop of sluggish economic growth, with the country entering a recession late last year.

The government’s independent forecaster, the Office for Budget Responsibility, also expects inflation – with interest rates rising – to fall to the 2% target before the end of June.

This suggests that the government could wait until the autumn to call elections, which are due to take place at the end of January 2025, instead of calling a poll in May.

By then, the economic picture will likely have improved and there could be another opportunity to cut taxes.

In other measures announced in the budget:

  • The Household Support Fund, which helps people struggling with cost of living pressures and was due to close in four weeks, will continue for another six months
  • Alcohol duty freeze, which was due to end in August, will be extended until February 2025
  • A new tax on vaping products will be introduced from October 2026
  • Tobacco duty will simultaneously rise by £2.00 per 100 cigarettes to ensure vaping remains cheaper
  • Fuel duty will be frozen again, with the 5p cut in fuel duty on petrol and diesel, which expires later this month, being maintained for another year
  • Tax benefits for holiday rental owners will be abolished.

The move to extend the windfall tax on energy companies has sparked a backlash from some Tories. Energy Minister Andrew Bowie and Scottish Conservative leader Douglas Ross both described it as “very disappointing”.

SNP economy spokesman Drew Henry also criticized the move, adding that it meant both the government and Labor were “intending to pull the rug from under the industry’s feet”.

He added that a “just transition from oil and gas” would not happen “if we squeeze the life out of the sector overnight.”

On public services, the chancellor said he would keep the planned increase in daily spending at 1% above inflation each year until 2029.

However, as some departments, such as health and education, have protected their budgets, this means that other departments, such as justice and local government, can expect significant cuts.

Mr Hunt said the public sector also needs to improve efficiency to deliver better value for taxpayers.

He announced investments in new technology to free up time for doctors, nurses and police, including £3.4 billion to modernize the NHS’s IT systems.

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