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UK chancellor Jeremy Hunt is set to cut national insurance rates as he puts personal tax reductions at the heart of his Budget on Wednesday.
Government insiders confirmed that Conservative whips had been told to prepare to rush through unexpected legislation on a single day next Wednesday. A cut to national insurance contributions requires a separate bill in parliament.
They have not denied that the bill relates to a national insurance cut, which would benefit about 27mn employees. Each cut of 1p in employee NICs costs the exchequer about £5bn.
Treasury officials refused to comment on a report by The Times that Hunt would cut national insurance by 2p — worth £450 a year to the average worker — repeating the 2p cut he announced in his Autumn Statement.
Some Conservative MPs had hoped that Hunt would focus his attention on cuts to income tax, a more easily understood tax and one that Prime Minister Rishi Sunak has repeatedly promised to reduce.
The last 2p cut in national insurance, which hit pay packets in January, failed to move the dial politically. On Monday, a poll by Ipsos put Tory support at 20 per cent, the lowest level since the poll began in 1978.
Sunak announced in his last Budget as chancellor in March 2022 that he would cut the basic rate of income tax from 20p to 19p by 2024.
“Before the end of the parliament, in 2024, for the first time in 16 years, the basic rate of income tax will be cut from 20 to 19p in the pound,” he said at the time. “A tax cut for workers, for pensioners, for savers.”
One potential option discussed by Tory MPs would be for Hunt to cut national insurance by 1p and also cut income tax by 1p, at a combined cost of about £12bn. But one government insider insisted that Hunt would not announce income tax cuts on Wednesday.
National insurance cuts benefit only workers and are deemed to promote work, while income tax cuts also help a wider group.
Hunt is expected to use his Budget to announce cuts to post-election departmental spending plans to help fund personal tax cuts, even though some economists warn they would harm strained public services.
Sunak’s spokesman said on Tuesday the government had boosted investment in public services but that Hunt was not opposed to efforts to increase efficiencies within departments including through the use of new technology such as artificial intelligence.
“As the chancellor said over the weekend, we don’t accept that one should just focus on spending inputs,” he said. “It’s important that we also look at how we can raise public sector productivity to deliver better outcomes.”
Greg Hands, trade minister, insisted on Tuesday that there were no plans for Sunak to call a snap general election in May off the back of Wednesday’s Budget.
If Sunak holds an autumn general election, that could allow him to hold a second tax-cutting fiscal event this year. The prime minister has said that his “working assumption” is that a poll will be held in the second half of the year.
But Jonathan Ashworth, a senior Labour backbencher, placed a £10 bet on Sky News that the election would be held in May, citing increased social media advertising by the Conservatives in recent weeks.