A look ahead at Jeremy Hunt's Budget as chancellor is to announce 2p cut to National Insurance

ITV News' Political Editor Robert Peston explains what to expect ahead of the Budget on Wednesday

Jeremy Hunt is expected to announce a two per cent cut to National Insurance in his Budget on Wednesday.

The chancellor is set to make his announcement just after midday.

He says his measures will "mean more investment, more jobs, more productive public services and lower taxes", as he tries to revive the economy and boost the Tories’ dire poll ratings ahead of this year’s expected general election.

Mr Hunt has said he will not pay for tax cuts with borrowing, meaning a combination of spending cuts and tax rises elsewhere will be necessary.

Here ITV News explains what the two per cent cut - which would cost the government about £10 billion a year - means for us.

How much will I save if National Insurance is slashed?

Employees currently pay ten per cent of earnings between £12,570 and £50,270 towards National Insurance.

That was reduced from 12 per cent by Mr Hunt at the Autumn Statement last year, but the £12,570 threshold for when you start paying is frozen until 2028.

Someone on a £35,000 annual salary will save £224.30 a year with a one per cent cut, and £448.60 with a two per cent cut.

A two per cent cut in National Insurance costs the government around £10 billion a year.

National Insurance is changing for self-employed people - from April 6, 2024 they’ll pay eight per cent on profits between £12,751 and £50,270, down from 9 per cent.

They will also no longer pay Class 2 National Insurance contributions - the government says this will be worth £350 a year for a self-employed person earning £28,000.

As the chancellor prepares for his speech on Wednesday lunchtime, questions remain over whether the government should focus on public spending rather than tax cuts, ITV News Political Correspondent Romilly Weeks reports

National Insurance vs Income Tax

National Insurance tax raises money for the Treasury to pay for certain benefits like the Jobseeker’s Allowance, and the state pension.

Mr Hunt is widely reported to have opted to cut national insurance rather than reduce income tax, which is more expensive but better understood by many voters.

Unlike National Insurance, which paid solely by those in employment, income tax is also paid for by pensioners and those who get their earnings from savings.

It means the cuts to National Insurance will be of no benefit to those groups.

Mr Hunt did not confirm the move in pre-Budget comments released by the Treasury, but reiterated the government’s focus on reducing the tax burden amid clamouring from Tory MPs.

Touting the Conservatives’ economic record, he said: “Of course, interest rates remain high as we bring down inflation.

“But because of the progress we’ve made because we are delivering on the Prime Minister’s economic priorities we can now help families with permanent cuts in taxation.

“We do this not just to give help where it is needed in challenging times. But because Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity.”

He added that growth “cannot come from unlimited migration”, but “can only come by building a high-wage, high-skill economy”.

Shadow chancellor Rachel Reeves has accused the Tories of overseeing 'fourteen years of economic failure'. Credit: PA

What has Labour said in response to the National Insurance cut?

With polls suggesting Labour is on track to win the general election, Mr Hunt will use his Budget to set electoral dividing lines with Sir Keir Starmer’s party.

The chancellor claimed that a Labour government would “destroy jobs with 70 new burdens on employers, reduce opportunities by halving new apprenticeships and risk family finances with new spending that pushes up tax”.

“Instead of going back to square one, our plans mean more investment, more jobs, more productive public services and lower taxes, sticking to our plan in a Budget for long-term growth.”

But shadow chancellor Rachel Reeves said Labour is “now the party of economic responsibility” as she accused the Tories of overseeing “fourteen years of economic failure” with the overall tax burden still rising.

She said: “The Conservatives promised to fix the nation’s roof, but instead they have smashed the windows, kicked the door in and are now burning the house down.

“Taxes are rising, prices are still going up in the shops and we have been hit by recession. Nothing the Chancellor says or does can undo the economic vandalism of the Conservatives over the past decade.

“The country needs change, not another failed Budget or the risk of five more years of Conservative chaos.”

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