Jeremy Hunt has said “lower tax means higher growth” as he promised “permanent cuts in taxation” for families on the eve of his Budget, expected to feature a 2p cut in national insurance.
The Chancellor said Prime Minister Rishi Sunak’s Government’s plans “mean more investment, more jobs, more productive public services and lower taxes”, and he accused Labour of having “no plan” and the Liberal Democrats of having “no principles”.
His headline measure on Wednesday looks likely to be a cut in national insurance by a further two percentage points, as he tries to revive the economy and boost the Tories’ dire poll ratings ahead of this year’s general election.
The final preparations are under way for the Spring Budget 2024.
Watch Chancellor @Jeremy_Hunt deliver his speech to the @HouseofCommons live across HM Treasury channels tomorrow. pic.twitter.com/OGHpAK6hGa
— HM Treasury (@hmtreasury) March 5, 2024
Mr Hunt is widely reported to have opted to cut national insurance rather than reduce income tax, which is more expensive but better understood by many voters.
He was said to have taken the decision after the fiscal watchdog the Office for Budget Responsibility downgraded the amount of fiscal headroom available for delivering tax cuts or spending commitments, within the Chancellor’s self-imposed rule of having debt falling as a share of gross domestic product by 2029.
The change could save the average worker £450 a year, adding up to £900 when combined with the 2p national insurance cut announced in last year’s autumn statement.
Mr Hunt did not confirm the move in pre-Budget comments released by the Treasury, but reiterated the Government’s focus on reducing the tax burden amid clamouring from Tory MPs.
Touting the Conservatives’ economic record, he said: “Of course, interest rates remain high as we bring down inflation.
“But because of the progress we’ve made because we are delivering on the Prime Minister’s economic priorities we can now help families with permanent cuts in taxation.
“We do this not just to give help where it is needed in challenging times. But because Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity.”
He added that growth “cannot come from unlimited migration”, but “can only come by building a high-wage, high-skill economy”.
With polls suggesting Labour is on track to win the general election, Mr Hunt will use his Budget to set electoral dividing lines with Sir Keir Starmer’s party.
The Chancellor claimed that a Labour government would “destroy jobs with 70 new burdens on employers, reduce opportunities by halving new apprenticeships and risk family finances with new spending that pushes up tax”.
“Instead of going back to square one, our plans mean more investment, more jobs, more productive public services and lower taxes, sticking to our plan in a Budget for long-term growth.”
But shadow chancellor Rachel Reeves said Labour is “now the party of economic responsibility” as she accused the Tories of overseeing “fourteen years of economic failure” with the overall tax burden still rising.
She said: “The Conservatives promised to fix the nation’s roof, but instead they have smashed the windows, kicked the door in and are now burning the house down.
“Taxes are rising, prices are still going up in the shops and we have been hit by recession. Nothing the Chancellor says or does can undo the economic vandalism of the Conservatives over the past decade.
“The country needs change, not another failed Budget or the risk of five more years of Conservative chaos.”
"This will be a prudent and responsible budget for long term growth – tackling inflation, more investment, more jobs."
Chancellor @Jeremy_Hunt on what's in store for the Spring Budget next week.
— HM Treasury (@hmtreasury) March 3, 2024
Experts have warned that a 2p national insurance cut, which would cost about £10 billion a year, would not be enough to stop the tax burden reaching record levels by the end of this decade.
Mr Hunt has said he will not pay for tax cuts with borrowing, meaning a combination of spending cuts and tax rises elsewhere will be necessary.
This could leave public spending facing a painful, and possibly implausible, squeeze after the election.
The Chancellor said: “With the pandemic behind us, we must once again be responsible and increase our resilience to future shocks. That means bringing down borrowing so we can start to reduce our debt.”
He accused the Lib Dems, who are challenging the Tories in southern England’s “blue wall” seats, of having “no principles”, saying the party “supported controlling spending in office, but now want to prop up a party after the election that will turn on the spending taps”.
But Lib Dem leader Sir Ed Davey described the Conservatives as “the great tax swindlers”.
“Rishi Sunak has led the economy into a recession and forced families to pick up the tab. They have no shame.
“The Conservatives must put the NHS at the heart of the budget. It is no wonder the economy isn’t growing when millions of people are stuck on NHS waiting lists, unable to work.”
Mr Hunt has faced warnings of real-terms cuts to NHS funding in the coming financial year.
The already-strained health service could endure a cut worth £2 billion in day-to-day spending in England – the largest reduction since the 1970s, according to the Institute for Fiscal Studies.