Hunt to cut National Insurance by 2p in Budget - report

5th Mar 2024 11:25

(Sharecast News) - Chancellor Jeremy Hunt will reportedly use his Budget on Wednesday to cut national insurance by a further two percentage points for 27m workers in a move worth £450 on average

According to The Times, the chancellor will make national insurance the central measure in his spring Budget after deciding against cutting income tax.

He will say that the tax cut is worth a total of £900 for the average worker when combined with the two percentage point cut that was announced in the autumn statement.

Hunt and Prime Minister Rishi Sunak decided against cutting income tax after the Office for Budget Responsibility significantly downgraded the amount of "fiscal headroom" available for tax cuts or spending commitments.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "Reports suggest Jeremy Hunt has decided to cut National Insurance by 2p in the Budget. It wouldn't be so much a rabbit pulled out of a hat as a slightly tatty-looking ferret dragged from a box, labelled 'rabbit'. An income tax cut has been discussed for well over a year. A National Insurance cut would be far better than nothing, but it would be a scaled-down, less attractive option. Jeremy Hunt would just have to hope it didn't bite.

"With taxes swallowing such a massive proportion of GDP, any tax cut would be welcome. This one would save us an average of £450 a year. And while the biggest savings would be reserved for those earning more, every saving helps at a time when our own budgets are stretched so thin.

"It's easy to see why this may have pipped income tax to the post in the race for Budget tax cuts, because it's much cheaper. A 2p cut would cost about £10 billion, which is more manageable for a Chancellor with shrinking headroom. However, the price Hunt would pay for opting for NI is clear. It would benefit fewer people. 27 million workers would pocket a tax cut, but millions more wouldn't, because it wouldn't affect the tax on pensions, and income from savings and investments like property. It means an awful lot of voters would get no benefit from the change.

"The move could also suffer from the fact that National Insurance was cut in January - and we can see this didn't make a dramatic difference in the polls. It may be that Jeremy Hunt has decided this is all he can afford to offer right now. The question will be whether it's a enough of a blockbuster tax cut to move the dial on a general election.

"Unfortunately, if NI is cut, it's not as good as it may sound, because it would come at the same time as yet another freeze in the personal allowance and the higher rate tax threshold, which the OBR says will see 1.1 million more people dragged into paying income tax and 800,000 more forced to pay higher rate tax. It means the government would be giving with one hand and taking away with the other."