Hunt to cut National Insurance
It added that the decision was taken after the UK’s fiscal watchdog, the Office for Budget Responsibility, downgraded the amount of “headroom” available for delivering tax cuts or spending commitments within the Chancellor’s rule of having debt falling as a share of gross domestic product (GDP) by 2029.
Experts warned that a 2p reduction in National Insurance contributions would not by itself be enough to stop the tax burden reaching record levels by the end of this decade.
The Institute for Fiscal Studies said the measure would not prevent taxes rising to around 37% of GDP by 2028-29. And the Resolution Foundation think-tank said the combination of another 2p cut, on top of the 2p reduction which came into effect in January, would be worth up to £1500 a year for employees.
The foundation added that, combined with freezes in the thresholds at which National Insurance is paid, the move would mean that the biggest net beneficiaries are those earning £50,000, who gain a net £1200.
Meanwhile, those earning £19,000 or less will actually be worse off overall as they would lose more from the threshold freeze than they gain from rate cuts.
The Resolution Foundation also said the £20 billion of cuts to employee National Insurance are set against the context of around £35bn of tax rises gained through the six-year personal tax threshold freeze.
Adam Corlett, principal economist at the Resolution Foundation, said: “There are huge questions about whether Britain can really afford £20bn of tax cuts this year, given the insufficient outlook for public spending and the need to reduce our national debt.
“But the Chancellor has at least opted for a better approach than cutting income tax rates – prioritising workers who face higher tax rates than landlords and pensioners.
“But, while this is going to be a taxcutting election year, it is sandwiched between significant past and future tax rises, with the Budget likely to only add to the number of tax increases coming in after the election.”
The Chancellor attended a preBudget audience with the King at Buckingham Palace yesterday.
The audience is traditionally a private one but, this time, the King was