‘We’re sticking to the plan’: Chancellor poised to unveil 2p National Insurance cut saving people a total of £900 a year

6 March 2024, 09:45 | Updated: 6 March 2024, 11:56

Chancellor Jeremy Hunt today said 'we're sticking to the plan' ahead of an expected cut to National Insurance in the Budget that will give the average worker an extra £450 back each year.

Mr Hunt said the planned cut would deliver "more opportunity and more prosperity".

He said families “want a society… where if they work hard, they can bring home more money for their family.”

“It is possible if we stick to a plan,” he added.

The Chancellor, who has faced pressure from Tory MPs to ease the record-high tax burden, promised "permanent cuts in taxation" that would bring "higher growth" as he seeks to woo voters ahead of this year's general election.

He looks likely to announce a cut in national insurance by a further two percentage points on Wednesday, matching a cut in the autumn statement.

Budget 2024 LIVE: Jeremy Hunt set to give workers a £450 boost with 2p cut to National Insurance

The National Insurance change could save the average worker £450 a year, adding up to £900 when combined with last year's move.

Mr Hunt's tax cut is widely seen as an attempt to claw back momentum ahead of an election this year - which Labour have said they expect as soon as May.

Labour are expected to argue in response to any national insurance tax cut announcements that 'fiscal drag' - people being caught in frozen tax brackets - as well as increases to council tax would still leave the average household worse off.

Labour leader Sir Keir Starmer said that his party would "grow the economy to put more money in [people's] pocket" if they gained power.

Sir Keir said: "The Conservatives have failed the economy and failed working people.

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"Families were better off with the last Labour government, and they'll be better off with the next one.

"Labour is the party of economic security, we'll grow our economy to put more money in your pocket."

Sir Ed Davey, the leader of the Liberal Democrats, said any tax cuts would be a "deception".

"We will look at the tax proposals the Conservatives bring in," he said. "But if they do cut taxes people will know it’s a deception, because they’ve raised income tax by freezing the tax allowances, a sort of a hidden tax rise on millions of people."

He added: “They may try and put on a swindle, but I think people will see through it. This is a tax-raising Conservative Government."

It comes after Labour predicted that the election would be in May.

Speaking to LBC's Andrew Marr on Tuesday evening, Shadow Health Secretary Wes Streeting said: "All of the indicators point towards May. It should be May.

"I think people are fed up with the idea that Rishi Sunak, for his own personal survival and wanting to clock up two years as prime minister, will squat in Downing Street into the autumn when people are crying out for change."

The election has to be held by January 28 next year at the very earliest, but it is likely to be this year. Mr Sunak has previously said he was working on the assumption the election would be in the autumn, but rumours have swirled in recent weeks that it could took place in May - in which case it would have to be called soon.

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Mr Hunt said "lower tax means higher growth" as he promised "permanent cuts in taxation" for families on the eve of his Budget.

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".

Mr Hunt's expected £10 billion tax cut would save 27 million workers an extra £450 a year. The chancellor also cut the rate in November's autumn statement.

He will sell the move as a £900 overall tax cut to workers when combined with the two percentage point cut that was announced in November.

The chancellor is poised to make national insurance a key measure in the spring Budget after deciding against cutting income tax.

Cutting income tax is much more expensive than reducing percentage points in employee National Insurance.

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A cut of two percentage points in employee National Insurance costs around £10 billion a year, whilst cutting 2p in income tax would cost £3.7 billion more.

This tax break is expected to come in April, according to The Times - which has not been denied by Treasury sources.

The opposition party expects Mr Hunt to take its policy of ending non-dom status, which Labour said it would use to fund most of the spending in government, to partly fund the move.

Chancellor Jeremy Hunt joins Matthew Wright ahead of the Budget

However, the Institute for Fiscal Studies has urged Mr Hunt to "tread carefully", and has warned of scrapping the tax status.

This allows foreign nationals living in Britain to avoid paying tax on overseas earnings and by scrapping the scheme, Mr Hunt risks driving wealthy people out of the country.

On Sunday, Mr Hunt said he is aiming to build on autumn’s reduction in national insurance contributions but will only cut taxes in a "prudent, responsible and affordable way".

Speaking to LBC's Matthew Wright, Mr Hunt said his Budget was intended to help grow the economy in the long term, allowing for tax cuts later.

"Overall, I think what people want is not gimmicks, they want a long-term, responsible, sensible plan to grow the economy so we can bring down taxes and have enough money for public services in the future - and that's what I'll be delivering," he said.

Mr Hunt continued to say his approach to cutting tax is "very straightforward".

"If you look around the world, the countries that are growing the fastest tend to be the ones with lower taxes," he said.

"We need to boost our growth... but I will only ever cut taxes in a way that is prudent, responsible and affordable.

On Tuesday morning, the King held an in-person pre-budget audience at Buckingham Palace.

The monarch, who is being treated for cancer, has continued with his duties as head of state of meeting with Mr Hunt.

Usually, the audience is private but this time the King was photographed shaking hands with the chancellor in the private audience room.