£12bn ‘fiscal headroom’ for Hunt may see another NI cut

JEREMY HUNT has £12 billion more “fiscal headroom” so could be tempted to slash another 2p off National Insurance, say leading economists.

The Institute for Fiscal Studies said the public finances moving into the new fiscal year 2024/25, and looking ahead, mean the Chancellor could deliver a third 2p cut to NI, possibly before an autumn general election, while still meeting his key debt rule.

It estimated this “mechanical rolling forward” of the five-year economic forecast could, “all else equal”, add some £12 billion to the Chancellor’s “headroom” against his fiscal mandate.

But IFS deputy director Helen Miller stressed: “This is a quirk of a poorly designed fiscal rule. It is not a sensible basis for more pre-election tax cuts.”

Mr Hunt, though, brushed aside such warnings to announce a 2p cut in National Insurance in the Budget, having done the same in the Autumn Statement last year.

Londoners will benefit most from the NI cut this year as salaries are generally higher here.

The fiscal think tank estimates that the next Chancellor will inherit a forecast with a budget deficit of around £40 billion in 2029/30, which would be low enough to have government debt falling as a share of national income in that year, as is required by the Government’s fiscal mandate.

But it stressed that this is predicated on the next government overseeing significant tax rises, allowing fuel duties to rise in line with inflation, cutting investment spending and delivering a return to austerity for many public services.