Times Claims 2p NIC Cut In Budget; May Not Be Enough For Conservative Right

Steven Swinford at The Times reportingthat Chancellor of the Exchequer Jeremy Hunt is to cut National Insurance Contributions (NICs) by 2 pence in the upcoming Budget statement on 6 March. Times: "The chancellor will make national insurance the central measure in his spring budget after deciding against cutting income tax." There has been speculation over the past week that with less 'fiscal headroom' than had previously been expected, Hunt would mirror his actions in the 2023 Autumn Statement with another NIC cut.

• Times: "Cutting income tax is significantly more expensive as it benefits both workers and pensioners. A cut of two percentage points in employee national insurance costs about £10 billion a year, while a 2p cut in income tax costs £13.7 billion a year."
• Politically the move is unlikely to quell the right of the governing Conservative party, which is calling for significant personal tax cuts with the tax burden currently at its highest level since the end of WWII. Amid record-low support in the latest Ipsos poll there is the low-probability, high-impact prospect of challenge for the party leadership ahead of the next general election.
• This threat could have seen the PM move towards more populist tax cuts, but there remain concerns regarding market reaction to measures seen as fiscally imprudent, with the lasting impact from the Truss-Kwarteng mini-budget in late-2022 fresh in the memory.
• Betting markets still see Q424 as the most likely time for an election, with a 76.3% implied probability. Given the state of polling for the party, a Jan 2025 election could prove more likely than Q224.

Source: Smarkets