Chancellor Jeremy Hunt has said he doesn’t yet know if he can afford to announce tax cuts for British households.
The Chancellor said he wants to ease the tax burden on Britons, which is forecast to rise to the highest level since the Second World War by the end of this decade.
A National Insurance rate cut of two percentage points announced by the Chancellor came into effect today, but Mr Hunt said he was not sure if he could afford to reduce taxes further.
He told reporters: “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.
Chancellor Jeremy Hunt has said he doesn’t yet know if the Government can afford further tax cuts
PA
“But we are a Conservative Government that wants to bring down taxes because we recognise that families are finding life really tough.
“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.
“It’s the start of a process. As Chancellor, 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 and it also helps to grow the economy. And we believe that a lightly taxed economy will grow faster and in the end that will mean more money for public services like the NHS.”
However, the National Insurance rate cut comes amid an ongoing six-year freeze to income tax thresholds, which is dragging many Britons into higher tax bands.
The Autumn Statement gave back just £1 in tax cuts for every £4 of tax rises due to threshold freezes since 2021, according to the Institute for Fiscal Studies.
Mr Hunt said: “We’ve turned a corner, brought down inflation, the economy is doing better, we want to bring down the tax burden, and this two per cent cut will make a very big difference to many families across the country.”
Prime Minister Rishi Sunak announced a freeze to tax thresholds until 2026 during his time as Chancellor.
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This was later extended by Mr Hunt until 2028. He made the announcement amid scrapping “almost all” of the tax cuts announced in Liz Truss’ mini-budget, which included £45billion of unfunded tax cuts.
The Labour Party said the Government's National Insurance rate cut would leave families with a "raw deal" because of hidden tax rises, in a new campaign unveiled this week.
Ministers have previously said the headline rate cut for employees is a tax cut worth £450 for the average employee on £35,400 in 2024/25, but Labour point out the freeze to income tax and National Insurance thresholds, which began in 2021, mean many families have been dragged into higher tax bands.
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.
“Working people know that this month’s tax con is just a cynical giveaway from a weak and out-of-touch Tory government that is desperate to cling onto power, rather than a credible plan to fix our broken economy.
“After 14 years of working people being left worse off under the Conservatives, it’s time for change.
“Rishi Sunak should call an election and give the public the chance to vote for a changed Labour Party that will change Britain for the better.”