Budget: Jeremy Hunt is expected to announce a 2p National Insurance cut

  • Written by Chris Mason and Kate Whannell
  • BBC Politics

Image source, Getty Images

Jeremy Hunt is expected to announce a 2p cut to National Insurance when he delivers his budget on Wednesday.

Hunt is under pressure, especially from Conservative MPs, to cut taxes now at a historic level.

Labor said any cuts would be canceled under the government's previous decision to freeze the thresholds at which people start paying taxes.

This move means that a salary increase is likely to pull a person into a higher range so that they pay more in taxes.

National Insurance contributions are paid by employees and the self-employed on their income, as well as by employers.

The amount paid depends on the individual's salary.

The focus of Wednesday's cuts is expected to be on employees rather than employers, as was the case in the autumn statement, when the key rate was reduced from 12% to 10%.

The extra 2p reduction would be around £450 a year for someone on a full-time salary of £35,000.

In his budget statement in the House of Commons on Wednesday, Hunt is likely to argue that rewarding work and putting more money in people's pockets is the government's driving motivation.

However, it comes against the backdrop of slowing economic growth, with the country entering recession at the end of last year.

It is cheaper to cut National Insurance than to cut income tax; However, some Conservative MPs fear the concept is less understood by many voters and therefore less politically useful.

They also claimed that the initial cut in National Insurance had not improved the Conservatives' political fortunes – a key consideration in the general election expected this year.

Labor also believes the government has more room to maneuver than ministers suggest and may also cut income tax.

Labor leader Sir Keir Starmer, when he responds to the budget, will say that tax cuts now still make people worse off because tax thresholds have been frozen, meaning many people pay higher rates of tax than they used to.

Alongside the expected National Insurance cut, Hunt is set to freeze fuel duty for another year. Fees have not increased since 2011.

The BBC was also told that Hunt would use his budget to urge councils to cut their spending on diversity programs and consultants.

It comes as councils across the country said they were struggling to balance the books.

Councils in Birmingham and Nottingham this week announced major cuts to services.

The Local Government Association has dismissed attacks on diversity schemes as a “distraction”, arguing that councils have spent “pence” on such projects.

People who do not have non-resident status are UK residents who live abroad for tax purposes. Under the current system, they do not have to pay UK tax on money they earn abroad.

If the party backs any tax cuts announced by the finance minister, which it is expected to do, this would leave questions about how some of its spending pledges will be financed.

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