- Paul Seddon & Becky Morton
- political reporter
Jeremy Hunt has announced he will cut taxes paid by Labor from April in a bid to shore up the Conservative Party's fortunes ahead of this year's election.
In last spring's Budget, before the vote, the Chancellor cut National Insurance by a further 2p in every pound, matching the previous cut in January.
He said the tax system would be fairer and help the UK economy recover.
But Labor described the announcement as a “fraud” and said many people's situation would become even worse.
Leader Sir Keir Starmer said he supported the cut, but it would not offset the tax threshold freeze and some people would end up paying more income tax over time. .
He added that taxes were at a 70-year high and people had suffered an “unprecedented hit” to their living standards in recent years.
Mr Hunt had been under pressure to cut personal tax as the Conservatives trailed Labor in opinion polls ahead of the next general election, due to be held later this year.
The January National Insurance cuts announced in last autumn's statement did not lead to the poll recovery that Conservative MPs had been hoping for.
This has fueled speculation that the Chancellor may opt for an income tax cut ahead of the Budget, which is thought to have a greater political impact on voters.
But he nevertheless announced a widely publicized 2p cut to National Insurance (NI), bringing the contribution rate for employees from 10% to 8% and for the self-employed from 8%. It was lowered to 6%.
It also expanded the eligibility of around 170,000 households to receive child benefit, allowing those with incomes up to £60,000 to receive the full benefit, and raised the cut-off threshold to £80,000.
Mr Hunt said the changes to NI would be worth £450 a year to employees on an average salary of £35,000.
In an interview with BBC political editor Chris Mason, he added that his long-term ambition was to abolish National Insurance completely, but that would only happen if it was “affordable”.
The party used the additional revenue from the policy to pay for new breakfast clubs and additional hospital appointments.
Labor says a planned freeze in the threshold at the start of income tax payments by 2028 will still mean an increased tax burden for many people, and that it will also consider a “stealth” rise in council tax. I have pointed this out and emphasized it passionately.
Lord Keir told the House of Commons that the Prime Minister was trying to “give with one hand and receive even more with the other”.
He added: “The whole country can see exactly what's going on here. When they see it, they know it's a Tory scam.”
Liberal Democrat leader Sir Ed Davey called the Budget “a last-ditch attempt by the Conservatives to hang on to power”, adding that it “reeks of desperation”.
He added: “I have never seen a government weaken public services, raise taxes and deliver zero growth at the same time.”
Former cabinet ministers Suella Braverman and Sir David Davis both expressed regret that the Chancellor had not chosen to cut income tax.
Mrs Braverman, who was sacked by the Chancellor last year, also said that a freeze on the income tax threshold would “pull millions of low- and middle-income workers into paying higher taxes”, while “unprecedented levels of “We're seeing low-wage, low-skilled workers.” Immigrants were hurting the economy.
“The government could have solved both problems today, but it didn't,” she said.
Change in tax base amount
The Institute for Fiscal Studies think tank says the combined effects of both the NI cuts and the threshold freeze from 2021 until April this year will mean people earning between £26,000 and £60,000 will be better off. It says that it means.
However, the situation is worse for those earning less than £25,000, while there is little difference for those earning between £60,000 and £120,000.
The prime minister said he would change the standard amount for child allowances and discuss moving to a system based on household income rather than individuals by April 2026.
The current system has been criticized as unfair because it sets standards based on the highest-earning parent rather than the family's combined salary.
This means families where both parents earn £50,000 each will receive the full amount, but single people earning £60,000 will receive nothing.
'Turn the corner'
The budget was drawn up against the backdrop of slowing economic growth as the country entered recession late last year.
The government's independent forecasting agency, the Office for Budget Responsibility, also expects inflation (and interest prices are rising) to fall to its 2% target by the end of June.
This suggests the government may wait until the autumn to hold elections, which must be held by the end of January 2025, rather than holding a May poll.
Economic conditions are likely to have improved by then, and the opportunity for tax relief may arise again.
Other measures announced in the budget:
- The Household Support Fund, which helps people struggling to make ends meet, was due to close within four weeks, but was due to continue for a further six months.
- Alcohol tax freeze, which was scheduled to end in August, will be extended until February 2025.
- New tax on e-cigarette products to be introduced from October 2026
- Cigarette tax will also be increased by £2.00 per 100 cigarettes at the same time to ensure e-cigarette prices remain low.
- Fuel duty will be frozen again, with the 5p cut in petrol and diesel fuel duty due to end later this month staying in place for a further year.
- Tax breaks for owners of holiday let properties will be abolished.
The move to extend the windfall tax on energy companies has sparked a backlash from some Tories, with Energy Secretary Andrew Bowie and Scottish Conservative leader Douglas Ross both calling it “deeply disappointing”. ing.
SNP economics spokesperson Drew Henry also criticized the move, adding it meant both the government and Labor were “trying to pull the rug out from under the feet of industry”.
He added that a “just transition away from oil and gas” would not happen “if we squeezed the life out of the oil and gas sector overnight”.
On public services, the Prime Minister said the planned increase in everyday spending would be maintained at 1% above inflation each year until 2029.
However, some sectors, such as health and schools, have their budgets protected, while others, such as the judiciary and local government, may see significant cuts.
Mr Hunt said the public sector also needed to improve efficiency to deliver better value for taxpayers.
He announced investment in new technology to save time for doctors, nurses and police, including £3.4bn to modernize NHS IT systems.