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© Reuters. The door of number 11 Downing Street, the official residence of the Chancellor of the Exchequer Jeremy Hunt is seen in London, Britain, March 5, 2024. REUTERS/Toby Melville
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LONDON (Reuters) -British finance minister Jeremy Hunt will cut the rate of social security contributions by two percentage points in his budget statement on Wednesday, possibly his last before an election expected later this year, The Times reported.
The cut to National Insurance Contributions (NICs) will be the central measure of Hunt’s budget after he decided against more expensive income tax cuts because of the tight fiscal room for manoeuvre available to him, the newspaper said on Tuesday.
Hunt said over the weekend that forecasts produced by Britain’s official budget watchdog “have gone against us”.
A Treasury spokesperson declined to comment about details of the budget.
Hunt wants to help to salvage Prime Minister Rishi Sunak’s faint election prospects. But the fragile public finances mean he has little room for major giveaways.
In November, Hunt announced a 2 percentage-point cut to NICs which would cost the public coffers almost 10 billion pounds ($12.7 billion) a year.
A repeat move this week, plus a latest extension of a freeze in fuel duty, would cost a total of about 15 billion pounds a year, slightly more than the 13 billion-pound “fiscal headroom” that The Times said was available to Hunt.
He is expected to give himself a bit more room by creating a new tax on vapes, extending by one year a windfall levy on energy firms’ profits and possibly tightening the rules on “non-dom” people living in Britain on their income abroad.
The opposition Labour Party, which has a big lead over the ruling Conservatives in opinion polls, has called for the windfall levy extension and abolition of the non-dom status.
Hunt might also announce future spending cuts to help pay for tax cuts now. Analysts and even the head of the government’s budget watchdog have criticised the lack of detail about where he might cut already stretched public services.
The government has said its 2 percentage-point cut in NICs announced in November and introduced in January will save the average salaried worker about 450 pounds in 2024.
($1 = 0.7886 pounds)
Source: Investing.com
