Hunt tries to save Tory party with tax cuts

Jeremy Hunt unveiled some voter-friendly tax cuts during his annual budget today, in a last-ditch attempt to save his party from impending electoral defeat.

The Chancellor’s biggest announcement was a 2p cut to the rate of National Insurance, at a cost of about £10 billion to the exchequer. This will affect 27 million workers from the start of April and, when combined with the previous 2p cut to NI in the Autumn Statement, is pitted to save the average wage-earner £900-a-year. 

Prior leaks mean Hunt’s Spring statement was hardly a suspense-filled occasion. Indeed, for this very reason, Adam Boulton made a plea in Reaction only yesterday to bring back Budget Purdah.

Having said that, there was some speculation that Hunt might opt for a double-whammy tax cut, delivering a 1p cut to income tax too. 

Some Tory backbenchers will be disappointed that Hunt chose to stick solely to the relatively cheaper option of slashing NI. Tory peer David Frost described the cut to NI as “welcome”, but added that it was much like “fiddling while Rome burns.”

Hunt also announced a further freeze of fuel and alcohol duty and, in one of the only surprise measures, he raised the child benefit threshold in an effort to encourage more parents to go back to work. The government estimates this will boost the workforce by around 10,000 – a welcome measure at a time when Britain is contending with ever increasing rates of economic inactivity. 

In a blow to the opposition, Hunt also stole one of Labour’s only known fiscal policies. He is set to abolish the non-dom regime, meaning no tax breaks for wealthy foreign residents in the UK who have non-domiciled tax status.

This afternoon was a vital opportunity for the Chancellor to generate a sense of economic optimism ahead of the looming election. But, after years of households feeling squeezed by austerity measures and inflation, will the goodies included in his Budget reverse the Tory party’s fortunes? 

While tax cuts are always deemed a vote winner, he already slashed NI once in last November’s Autumn Statement and it has done little to help his party’s popularity. According to Ipsos polling from earlier this week, support for the Conservative party is now at the lowest level ever recorded since the firm’s political monitor began in 1978. 

Interestingly, two other recent polls from YouGov suggest British voters are more concerned about seeing more money spent on public services than they are about tax cuts. Despite the tax burden being at a 70-year high. 

While Hunt’s budget is unlikely to stave off a Tory defeat later this year, it will create a further headache for an incoming Labour government. 

Even Hunt’s fairly modest tax cut will create tricky decisions for Labour further down the line when it comes to balancing the books. 

According to the IFS’s Carl Emmerson, the Chancellor has chosen to reduce his headroom meaning he will meet his fiscal target by even less than what he had anticipated back in November. “In broad terms, that means debt will have fallen by a hair’s breadth in five years time,” says Emmerson. Back in November, Hunt was expecting debt to fall between year four and year five by £13bn pounds. Now, he’s expecting it to fall by just £9 billion. “It looks to me like that reduction was broadly enough to pay for the tax cut we got today,” Emmerson adds. 

Even more politically damaging for Starmer, Hunt has baked in cuts to public service budgets – but in the years beyond March 2025. This means they will fall squarely in the lap of the next government, rendering Labour the new party of austerity. 

Of course, Starmer wouldn’t be the first opposition party to take on a poisoned chalice. It calls to mind the infamous note Tory Chancellor Reginald Maudling left on his desk in 1964 for his Labour successor: “Good luck, old cock … sorry to leave it in such a mess.”

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