Jeremy Hunt says ‘I don’t yet know’ if govt can cut taxes again before election after National Insurance reduction

Published

1 year ago

January 6, 2024

admin

Chancellor Jeremy Hunt is unsure if the government can afford further tax cuts – as a National Insurance (NI) reduction comes into force today.

The pre-election cut to NI, from 12% to 10%, will impact around 27 million payroll employees across the UK.

A person earning the UK’s average salary of £35,000 will save £450 a year, or £37.38 a month, as a result of this change.

Money latest:
See how much your pay will change

Mr Hunt said the reduction, announced in his Autumn Statement last year, means “that a typical family with two earners will be nearly a thousand pounds better off this year”.

But Labour argued this wasn’t true, saying frozen income tax and national insurance thresholds mean that many families have been drawn into higher tax bands.

The Opposition’s new attack ads criticising the policy even made it onto the Tory-supporting website Conservative Home on Friday.

Shadow chancellor Rachel Reeves said: “Under Rishi Sunak’s raw deal, for every extra £10 people are paying in tax they are only getting £2 back.”

‘If I can afford to go further I will’

In a statement on Saturday, Mr Hunt said he wanted to further ease the tax burden, which is expected to rise to the highest level since the Second World War before the end of this decade, but he doesn’t yet know if he can.

He called the NI reduction “the start of a process”, adding: “If I can afford to go further I will… I don’t yet know if I can.

“We want to do this because it helps families, it also helps to grow the economy, and we believe that a lightly taxed economy will grow faster and in the end that’ll mean more money for public services like the NHS.”

Mr Hunt argued the Conservative government “wants to bring down taxes” and recognises that “families are finding life really tough”.

But he defended its previous measures, saying: “It was right to support families through COVID and through the cost of living crisis, and yes taxes had to go up in that period.”

The government says its NI reduction is the biggest tax cut on record for workers.

The chancellor added: “Even after the effect of the tax rises that have happened previously, this means that a typical family will see their taxes go down next year.”

Will Hunt cut taxes again before election?

The clock is ticking for Mr Hunt to find the fiscal headroom to cut taxes again.

The spring budget, pencilled in for 6 March, will be the last chance for him to make major tax and spending promises before the election, which Mr Sunak has said will likely be in the second half of the year.

Following the Autumn Statement in November, the government has faced pressure from Tory MPs to go further and cut income tax or inheritance tax.

While many campaigners welcomed the National Insurance changes, they pointed out that the tax burden remains at record high levels for Britons – thanks in part to the threshold at which people start paying personal taxes being frozen, rather than rising with inflation.

Mr Sunak introduced the current tax freezes when he was chancellor back in 2021 and as prime minister, extended the time they would need to be in place, from 2026 to 2028.

This causes a so-called “fiscal drag” as pay goes up but tax thresholds don’t, so more people are dragged into higher tax brackets.

The Institute for Fiscal Studies has said the Autumn Statement gave back just £1 in tax cuts for every £4 of tax rises due to threshold freezes since 2021.

Ms Reeves claimed that despite the NI cut, the average family was paying £1,200 extra tax this year “because of choices by Rishi Sunak and this Conservative government”.

“Never have people paid so much in tax and got so little in return in the form of public services,” she said.

However, the Labour leadership has not committed to cutting tax or unfreezing the thresholds if they win the election.

Sir Keir Starmer told Sky News his priority is to grow the economy and he won’t make promises he can’t keep – but that he does want to “lower the burden of working people”.

Politics

SEC says REX-Osprey staked SOL and ETH funds may not qualify as ETFs

Published

13 hours ago

May 31, 2025

admin

SEC says REX-Osprey staked SOL and ETH funds may not qualify as ETFs

The SEC responded shortly after the issuers filed effective registration amendments for staked SOL and Ether exchange-traded funds.

Politics

IMF raises concern over Pakistan’s Bitcoin mining power plan: report

Published

22 hours ago

May 31, 2025

admin

IMF raises concern over Pakistan’s Bitcoin mining power plan: report

IMF questions Pakistan’s plan to allocate 2,000 megawatts of electricity for Bitcoin mining amid energy shortages and budget talks.

Politics

‘No doubt’ UK will spend 3% of GDP on defence in next parliament, defence secretary says

Published

1 day ago

May 31, 2025

admin

'No doubt' UK will spend 3% of GDP on defence in next parliament, defence secretary says

There is “no doubt” the UK “will spend 3% of our GDP on defence” in the next parliament, the defence secretary has said.

John Healey’s comments come ahead of the publication of the government’s Strategic Defence Review (SDR) on Monday.

This is an assessment of the state of the armed forces, the threats facing the UK, and the military transformation required to meet them.

Prime Minister Sir Keir Starmer has previously set out a “clear ambition” to raise defence spending to 3% in the next parliament “subject to economic and fiscal conditions”.

Mr Healey has now told The Times newspaper there is a “certain decade of rising defence spending” to come, adding that this commitment “allows us to plan for the long term. It allows us to deal with the pressures.”

A government source insisted the defence secretary was “expressing an opinion, which is that he has full confidence that the government will be able to deliver on its ambition”, rather than making a new commitment.

The UK currently spends 2.3% of GDP on defence, with Sir Keir announcing plans to increase that to 2.5% by 2027 in February.

This followed mounting pressure from the White House for European nations to do more to take on responsibility for their own security and the defence of Ukraine.

The 2.3% to 2.5% increase is being paid for by controversial cuts to the international aid budget, but there are big questions over where the funding for a 3% rise would be found, given the tight state of government finances.

While a commitment will help underpin the planning assumptions made in the SDR, there is of course no guarantee a Labour government would still be in power during the next parliament to have to fulfil that pledge.

A statement from the Ministry of Defence makes it clear that the official government position has not changed in line with the defence secretary’s comments.

The statement reads: “This government has announced the largest sustained increase to defence spending since the end of the Cold War – 2.5% by 2027 and 3% in the next parliament when fiscal and economic conditions allow, including an extra £5bn this financial year.

“The SDR will rightly set the vision for how that uplift will be spent, including new capabilities to put us at the leading edge of innovation in NATO, investment in our people and making defence an engine for growth across the UK – making Britain more secure at home and strong abroad.”

Sir Keir commissioned the review shortly after taking office in July 2024. It is being led by Lord Robertson, a former Labour defence secretary and NATO secretary general.

The Ministry of Defence has already trailed a number of announcements as part of the review, including plans for a new Cyber and Electromagnetic Command and a £1bn battlefield system known as the Digital Targeting Web, which we’re told will “better connect armed forces weapons systems and allow battlefield decisions for targeting enemy threats to be made and executed faster”.

On Saturday, the defence secretary announced a £1.5bn investment to tackle damp, mould and make other improvements to poor quality military housing in a bid to improve recruitment and retention.

Mr Healey pledged to “turn round what has been a national scandal for decades”, with 8,000 military family homes currently unfit for habitation.

He said: “The Strategic Defence Review, in the broad, will recognise that the fact that the world is changing, threats are increasing.

“In this new era of threat, we need a new era for defence and so the Strategic Defence Review will be the vision and direction for the way that we’ve got to strengthen our armed forces to make us more secure at home, stronger abroad, but also learn the lessons from Ukraine as well.

“So an armed forces that can be more capable of innovation more quickly, stronger to deter the threats that we face and always with people at the heart of our forces… which is why the housing commitments that we make through this strategic defence review are so important for the future.”