Kate Andrews

Could Jeremy Hunt really abolish employee National Insurance (NI)? His additional 2p cut announced in yesterday’s Budget seems to be the start of what the Tories might offer up in their election manifesto. Hunt has now suggested the end goal would be to merge income tax with employee NI, helping to simplify the tax code. The point was further made by Rishi Sunak at the Centre for Policy Studies’ 50th anniversary dinner last night: that it should be the Conservative party’s ‘plan, long term, to end that unfairness’ of taxing income twice. But is this in any way possible?

Does Jeremy Hunt have the cash to spend on tax cuts in his spring Budget next week? That’s the billion pound question that the Institute for Fiscal Studies (IFS) focused on during its pre-Budget briefing this morning, hosted by Director Paul Johnson and Deputy Director Carl Emmerson.  As Ross Clark notes on Coffee House, the latest rumours suggest that the Chancellor is pivoting away from an income tax, inheritance tax or stamp duty cut (the last of which is considered most desirable by economists, including those over at the IFS, due to how badly it distorts the housing market and weighs down growth). Instead he may be opting for another penny off employee National Insurance.

The good news started with the revelation that last month had produced a surplus of £16.7 billion for the Treasury – double the surplus of the same month last year and a record-breaking amount (in nominal terms) since records began. This has boosted hopes that the Chancellor will be able to offer up more tax cuts in his Spring Budget (though admittedly his headroom to do so still seems to be notably less than the amount he had to play with last autumn to deliver the business tax cuts).  Now, as money comes off workers’ tax bills, their energy bills will fall too. This morning Ofgem announced changes to the energy price cap from April, which will fall by 12.3 per cent. The new cap for gas prices will be 6p per kWh, and 24p per kWh for electricity.

Jeremy Hunt needed some good news this morning, when the monthly public sector finance update was released by the Office for National Statistics (ONS). Having promised meaningful tax cuts last month – and then rowed back expectations this month – the Chancellor was hoping for a notable surplus and reduction in borrowing to give himself a bit more room within his fiscal rules to cut tax. January delivered. The ONS reports a surplus of £16.7 billion in January 2024 – not only double the surplus of the same month last year, but a record-breaking surplus (in nominal terms) since records began. Receipts jumped up to £111.4 billion – almost £4 billion more than January 2023 – while borrowing for the financial year rose to £96.6 billion, £3.