Jeremy Hunt has announced the rate of National Insurance (NI) will be cut from 10 per cent to 8 per cent in the Spring Budget as the government gears for a rocky general election.
The Chancellor unveiled the measure- worth £10bn – as the centrepiece of a pre-election package of measures aimed at winning back waning Tory support, which also saw him scrap the current tax system for so-called non-doms, citing “Nigel Lawson’s… great tax reforming Budget of 1988”.
It will be replaced by a residency-based system which will see new arrivals enjoy a more generous regime for the first four years – before transitioning to “pay the same taxes as other UK residents”.
Speaking to a packed Parliamentary chamber, Hunt, who also confirmed he would keep public service spending at the “planned one per cent” said: “Of course, interest rates remain high as we bring down inflation.
“But because of the progress we’ve made, because we are delivering the Prime Minister’s economic priorities, we can now help families we can now help families not just with temporary cost of living support, but with permanent cuts in taxation.
“We do this not just to give help where it is needed in challenging times. But because Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity.”
He added: “The policies I announced today meaning more investment, more jobs, better public services, and lower taxes in a budget for long term growth.
“Keeping taxes down matters to Conservatives in a way it never has for Labour. We believe that in a free society. The money you earn doesn’t belong to the government. It belongs to you.”
He framed it as handing back £900 to the average taxpayer, taken in conjunction with the 2p NI cut announced in November which came into force in January, each cut individually worth £450.
The Chancellor also stated that the Conservatives’ “long-term ambition” was to end the “double taxation of work” via both income tax and NI.
“When it is responsible, when it can be achieved without increasing borrowing and when it can be delivered without compromising high quality public services, we will continue to cut NI as we have done today so we truly make work pay,” he said.
Hunt also said he would cut self-employed National Insurance from eight per cent to six per cent.
“Changes that make our system simpler and fairer. And changes that grow our economy by rewarding work,” he added.
However, in the context of fiscal drag – stealth tax rises via tax rates not matching wage growth – the Resolution Foundations warned high earners would be still £500 worse off.
Other measures included freezing alcohol duty until February 2025 in a bid to support hospitality, and the now traditional freezing of fuel duty for another year, while maintaining the 5p cut, worth £1bn.
However, there was a blow for smokers as Hunt confirmed “an excise duty on vaping products from October 2026” and a “one-off increase in tobacco duty… to maintain the financial incentive to choose vaping over smoking”.
While following calls from the Confederation of British Industry (CBI) and Make UK, Hunt confirmed he would bring forward legislation to make full expensing apply to leased assets, as well as upping the VAT registration threshold from £85,000 to £90,000 from April 1.
On pension funds, the Chancellor announced he would give “new powers to The Pensions Regulator and Financial Conduct Authority” to improve value and create new disclosure rules on UK/foreign investment.
There will also be a retail sale of Natwest shares by this summer at the earliest, while a new British Savings Bond and a brand new British ISA, worth £5,000 annually, will be created, he added.
Property taxes saw Hunt abolish the Furnished Holiday Lettings regime, as well as scrapping stamp duty relief for people who purchase more than one dwelling in a single transaction.
He also reduced the higher rate of property capital gains tax from 28 per cent to 24 per cent, and extended the “sunset on the Energy Profits Levy for an additional year to 2029 raising £1.5bn”.
The latest Office for Budget Responsibility (OBR) figures on inflation, the Chancellor revealed, indicate inflation is set to drop below two per cent “in just a few months time, nearly a whole year earlier than forecast in the autumn statement”.
Crucially, Hunt also said the OBR have forecast the government is set to meet its fiscal rules to have debt falling as a share of GDP within five years, giving the UK final year headroom against debt falling of £8.9bn.
The Budget – Hunt’s fourth fiscal event as Chancellor – came as the Conservatives hit record lows in the polls, in the face of a 27-point lead for the Labour Party.
Earlier this week, Ipsos found support for the party was at just 20 per cent – the lowest ever since the firm began its Political Monitor tracker in 1978.
Hunt came under pressure ahead of the Budget to offer a retail package to voters in the hopes of winning back wavering Conservative support.
Speculation has mounted in recent days that Prime Minister Rishi Sunak could opt to go to the country in May, to coincide with the local elections, following Conservative hopes flights to Rwanda could be taking off by late spring.
But despite the party framing the Budget as tax-cutting, according to the Institute for Fiscal Studies (IFS), over the past 14 years, the tax burden has risen to a record high.