Tax cuts allow a cautious chancellor to create some headaches for Labour

  • By Chris Mason
  • Political Editor, BBC News

We got a glimpse into the main struggle of the general election campaign.

The battle for economic credibility.

This was a budget in which the chancellor sought to portray himself as a careful, cautious guardian of the economy.

The drop in National Insurance, together with the same cut a few months ago, amounts to a large tax cut.

But there was nothing surprising in what Jeremy Hunt had to say, no fireworks likely to immediately change the Conservatives’ prospects.

Instead, Mr Hunt tries to argue that the economy is slowly but surely recovering.

For example, in my interview with him he pointed out that the average earner will be better off if you compare the cuts to National Insurance with the frozen tax thresholds that have led to huge tax increases for many people.

But the big economic argument yet to come is broader than that. It includes inflation, mortgage costs, rent and per capita income.

While the metrics are trading in the coming days, there is something underneath that is more important: sentiment. Do people feel better off, do they feel they have more disposable income and do they have economic confidence in the future?

It is these three questions that frame the political debate between the Conservatives, Labor and others over the economy.

Labor feels they have found a path back to being taken seriously by many on the economy again, and there are opinion polls to support this.

Which is often an Achilles heel for Labour, which they now hope is a strength, not least because they think a lot of people will feel worse off under the Conservatives.

For the Tories, on the other hand, what has so often been a strength for them is now a vulnerability: the economy, as they overcome the turbulence of recent years.

Many would accept that most of that turbulence was completely beyond their control: the pandemic and the war in Ukraine, both of which prompted huge government spending to support families and businesses that many were very grateful for.

The consequences of that spending are now visible in tax rates and the national debt, among other things.

But Labor is also keen to place some of the blame squarely on the Tories. ‘Where’s Liz? Where is Kwasi?’ shouted Labor MPs during the budget speech.

Pantomime-like questions with political bite: Labor wants to remind people that the previous Prime Minister and the previous Chancellor caused an economic disaster with real consequences.

Jeremy Hunt, in addition to what he has announced, is trying to chart a course of action: he told me he would like to scrap National Insurance altogether.

That could be like you or I saying we’d like to win the lottery: what we want to do and what is likely to happen are not the same. Demolishing it would cost a fortune.

But it is an indicator of aspiration, and an attempt to identify the differences between the Conservatives and Labour.

Can he do enough to tempt people to reconsider switching to Labour?

The polls show he’s doing a great job.

Meanwhile, Labor is trying to appear reassuring to swing voters, aware that they lose far more elections than they win.

And so they have agreed to much of what this government is announcing, both in the budget and over the last six months, including much of what was in the budget.

What now leaves them with a headache: how to deliver on some of their promises after accepting the chancellor’s tax cuts.

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