Jeremy Hunt’s election Budget gamble: 2p off national insurance – but no cut in income tax

Jeremy Hunt is set to pile further pressure on Britain’s creaking public services with a multibillion-pound tax cut aimed at winning over disgruntled voters – but is expected to stop short of targeting income tax after being warned his plans were unaffordable.

The chancellor is expected to offer millions of workers a 2p cut to their national insurance in Wednesday’s Budget, saving the average earner £450 a year. Combined with the cut handed out in November, the average earner will now have been handed an annual tax cut worth £900.

In what could be seen as a big election gamble for Rishi Sunak, an income tax cut is now thought to be less likely after Mr Hunt was forced to rip up his plans last week when the spending watchdog, the Office for Budget Responsibility, warned they were unaffordable.

But economists have still warned the national insurance cuts will disproportionately favour higher earners, while pollsters suggested the latest giveaway will do little to shift the Tories’ standing in the polls.

Experts added that the “damaging” plans would add to the strain on the public purse, leading to inevitable cuts to public services in years to come.

Speaking ahead of the Budget, Mr Hunt promised a “long-term plan for growth in the United Kingdom”.

The chancellor said that “because of the progress we’ve made … we can now help families with permanent cuts in taxation”.

And he warned voters that Labour would take Britain “back to square one” and oversee tax hikes that “risk family finances”.

Hitting back at Mr Hunt’s claims, shadow chancellor Rachel Reeves said that while the Conservatives promised to “fix the nation’s roof … they have smashed the windows, kicked the door in and are now burning the house down”.

She added: “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.”

It came as Professor Sir John Curtice, Britain’s most respected polling guru, said the tax cuts would likely make no difference to the Tories’ dire poll ratings.

Sir John told The Independent that many voters have “made their minds up after the Liz Truss fiasco”, while many other traditional Tory voters would not feel the benefits of the tax cut as older voters do not pay national insurance.

He added that voters are concerned about the state of Britain’s public services, particularly the NHS, and would rather see more investment than giveaways disproportionately benefitting the wealthy.

Sir John said: “The 2p cut in November did not have any discernible impact on the Conservatives’ position in the polls. In fact, [it] is as bad as it has been at any point in this parliament.”

The veteran pollster said he would be surprised if the tax giveaway had any impact on the Tories’ dire polling figures but said it would depend “on the skill of the politicians to market it”.

Veteran pollster Professor Sir John Curtice said he would be ‘surprised’ if Jeremy Hunt’s Budget sparked a turnaround for the Conservatives

Laura Suter, head of personal finance at investment platform AJ Bell, said the benefit of the tax cut would be smaller for those on lower incomes, as less of their earnings are taxed to begin with.

Meanwhile, analysis by think tank the Resolution Foundation found that, despite the national insurance cuts, only those earning between £27,000 and £59,000 would be better off due to the government’s decision to freeze the thresholds for different tax bands.

The freeze, first introduced by Mr Sunak when he was chancellor, has dragged millions of workers into higher tax brackets. Everybody earning below £27,000 and above £59,000 will still be worse off at the end of this parliament, the think tank found.

It added that Mr Hunt’s decisions will only add to the likely tax hikes to be brought in after the general election expected this autumn.

Keir Starmer and Rachel Reeves prepare a response to Jeremy Hunt’s Budget

The King meets his chancellor ahead of this week’s Budget

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