Jeremy Hunt will today unveil a spring budget designed to reverse his party’s lagging polling numbers, headlined by a 2p cut to National Insurance.
The widely reported, and not denied, move will hand back around £10bn to taxpayers. It is the second cut to national insurance in a matter of months, with Hunt having cut it from 12 to 10 per cent in the Autumn Statement.
However, the cuts come amongst a context of stealth tax rises in the form of ‘fiscal drag,’ with the thresholds at which different tax rates kick in not keeping up with wage inflation.
Early analysis by the Resolution Foundation suggested that the 2p cut, in the context of fiscal drag over the course of this parliament, would still leave higher earners worse off overall by around £500.
The Institute for Fiscal Studies also said the UK taxpayers remained on track to shoulder the heaviest Treasury burden in a generation.
The budget comes amidst record low polling numbers for the Tories.
Hunt is expected to tell the Commons: “Because of the progress we’ve made – because we are delivering on the Prime Minister’s economic priorities – we can now help families with permanent cuts in taxation.
“Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity.”
In autumn 2022, Hunt froze thresholds until 2028, which the OBR reckons will see millions of households having to pay more tax than if the thresholds were raised in line with inflation.
The Chancellor is also expected to call for “higher wages and higher living standards” across the UK, which he will argue “cannot come from unlimited migration” but only via “building a high wage, high skill economy – not just higher GDP, but higher GDP per head”.
Legislation will reportedly come to Parliament on the NI cut next week, following reports Hunt and Rishi Sunak battled over income tax cuts not understood to be expected tomorrow.
The Chancellor will also argue against borrowing, saying: “An economy based on sound money does not pass on its bills to the next generation.
“With the pandemic behind us, we must once again be responsible and increase resilience to future shocks. That means bringing down borrowing so we can start to reduce our debt.”
Labour’s shadow Chancellor Rachel Reeves accused the Tories of “fourteen years of economic failure” and leaving “Britain worse off”.
She said: “Taxes are rising, prices are still going up in the shops and we have been hit by recession. Nothing the Chancellor says or does can undo the economic vandalism of the Conservatives over the past decade. The country needs change, not another failed Budget.”