Budget 2024 live: Jeremy Hunt cuts national insurance, abolishes non-dom status and raises child benefit threshold

Hunt confirms 2p cut in national insurance, claiming average personal taxes now at lowest level since 1975

Hunt is now talking about national insurance.

From April employee national insurance will be cut from 10% to 8%, and self-employed NICS from 8% to 6%.

He says, combined with the changes announced in the autumn statement, 27 million people will gain £900. And 2 million self-employed people will gain £650.

He says the OBR says this will put 200,000 more people in work. And it will increase GDP by 0.4%, he says.

He says this will bring personal taxes to their lowest level since 1975.

And he says the Conservatives will continue to keep cutting national insurance.

(There is a big difference between personal taxes and the overall tax burden. In 1975 VAT had only just been introduced, and it was levied at 10%. It is double that rate now.)

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Key events

IFS: Hunt taxes the smoke and mirrors Labour’s plans

Paul Johnson, director of the Institute for Fiscal Studies, is in witty mood as he analyses the budget:

“We’ve learned to expect some degree of smoke and mirrors in the Budget. Today was no different, only on this occasion Mr Hunt decided to tax the smoke and to mirror the Labour party’s tax pledges on non-doms and North Sea oil.

Alongside a new tax on vaping and an increase in tobacco duty, this was enough to allow Mr Hunt to announce another, well-trailed cut to National Insurance.

Johnson welcomed the 2p cut in national insurance, which – when combined with the 2p cut from November’s Autumn Statement – means those on just above average earnings will gain around £1,000 a year.

Changing the non-dom system, and reforming the child beneit tax credit, are also welcome. he says.

But overall, Johnson says “this remains a parliament of record tax rises.”

He explains:

Some bright spots, then, though the big picture on tax remains much the same. Come the election, tax revenues will be 3.9% of national income, or around £100 billion, higher than at the time of the last election. This remains a parliament of record tax rises.

ShareTories challenge Labour to say what will happen to policies it planned to fund through tax measures Hunt has adopted

Governments don’t like performing U-turns, but for Jeremy Hunt there were two bonuses from lifting two of Labour’s tax plans; it funded his tax cuts, and might force Labour to drop some of its more attractive spending plans.

To emphasis this point, CCHQ has just sent a briefing note to journalists saying Labour must now explain whether it is going to abandon these policies, or find another way of funding them.

The Tories say these are the policies Labour was planning to fund with £1.6bn from the abolition of non-dom status.

And the Tories says these are the policies that Labour plans to fund with £4.9bn from the extension of the windfall tax.

Labour is holding a briefing this afternoon, so we should get some sort of response then.

The Tories expect to raise more from the abolition of non-dom status than Labour said it expected to raise. But Labour’s version of the extension of the windfall tax is forecast to raise more than the Jeremy Hunt version, which he says will raise £1.5bn by 2029, and so not all the Labour revenue has been spent.

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Yael Selfin, chief economist at KPMG UK, predicts that “the majority” of recent tax cuts may need to be reversed after the next election, to provide “adequate” public services levels:

The Government’s plans for the overall spending envelope imply that funding on unprotected departments would have to fall by over 3% a year in real terms, which is unrealistic in the absence of sustained productivity growth.

The majority of recent tax cuts may need to be reversed in the next Parliament in order to maintain an adequate provision of public services after the current Spending Review period.

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Updated at 10.40 EST

Economists are warning that Jeremy Hunt is sailing very close to breaking his fiscal rule, to have debt falling as a share of the economy in five years.

Barret Kupelian, chief economist at PwC, says the chancellor is within a “rounding error” of missing the rule.

As his starting headroom was limited, he did what most Chancellors are famous for – take with one hand and give with the other – to further fund his tax cuts. The most notable revenue raising measures he announced were around taxing on non-domiciled individuals, tobacco and vaping products, extending the energy profits levy and adjusting the Air Passenger Duty.

“On balance though, this means that the Chancellor’s headroom at the end of the fiscal period is very limited and thus is dangerously close to breaking his own rules. The OBR expects around £9 billion of headroom to remain – if fuel duty remains frozen, this would get it down to £4.5 billion, which is virtually a rounding error.

The OBR point out that Hunt’s margin is much narrower than previous chancellors have judged wise:

Michael Saunders, the former Bank of England policymaker who is now senior economic advisor at the consultancy Oxford Economics, points out that the current forecasts are based on ““fiscal fantasies” – including that fuel duty will rise.

Saunders says:

On paper, the Chancellor will just about meet his fiscal rules, and the OBR forecast that the public debt/GDP ratio will fall in five years. But these forecasts rest on fiscal fantasies. They assume that petrol taxes will rise in line with inflation, even though the government has decided against doing that for fourteen consecutive years.

What’s more, they assume that the government will deliver a painful public spending squeeze – with little or no growth in real spending per head in the next few years – even though it lacks any credible plans to achieve this. The government has learnt to game the OBR framework by pencilling in future fiscal restraint without appearing to be serious about delivering it.

ShareHouseholds still £870 worse off on average, Labour claims, because NI cuts don’t compensate for freezing allowances

Labour claims that, despite the cut in national insurance in the budget, households are still £870 worse off on average as a result of the tax measures taken by the Tories. Labour has calculated this figure on the basis that the cuts worth £21.4bn (by 2028-29) need to seen alongside the the impact of the extra £41.1bn raised by the freeze in thresholds and allowances for tax and national insurace.

Those two figures from from this chart in the OBR’s report.

Costings for NI cuts, and freezing thresholds and allowances Photograph: OBRShare

Updated at 10.29 EST

Vaping tax could double cost of highest nicotine products

The government’s planned tax on vaping liquids could double the cost of the strongest e-liquids from 2026.

The Office for Budget Responsibility say they expect it will raise £500m per year by the 2028-29 financial year, although there are “several uncertainties in the costing”.

The OBR explains:

The new tax applies a specified fixed amount of duty to a defined quantity of e-liquid and will be charged to UK manufacturers or importers. There are three rates that are differentiated according to the amount of nicotine content in the e-liquid.

It means that a vaping product that falls within the highest nicotine category and currently retailing at £3.00 (for 10 millilitres of e-liquid) will be subject to a £3.00 rate of duty (in 2026-27), raising its post-tax price to £6.60 (since we assume all of the duty will be passed through to consumers).

The budget documents released by the Treasury have more details:

The government will introduce a new duty on vaping products from 1 October 2026, with registrations for the duty opening from 1 April 2026.

The rates will be £1.00 per 10ml for nicotine free liquids, £2.00 per 10ml on liquids that contain 0.1-10.9 mg nicotine per ml, and £3.00 per 10ml on liquids that contain 11mg or more per ml. A 12-week consultation will be published on the policy design and technical details alongside the Spring Budget.

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Updated at 10.21 EST

Energy minister Andrew Bowie says extension of windfall tax on energy firms ‘deeply disappointing’

Normally ministers are meant to promote the budget on social media. But Andrew Bowie, an energy minister, has posted a message on X saying the extension of the windfall tax on energy companies (EPL – energy profits levy) is “deeply disappointing”.

I agree with Douglas.There is much in this budget to welcome. Much that is good for Scotland and our United Kingdom. And only the Conservatives have a plan.However, the extension of the EPL is deeply disappointing. I will be working with him to resolve this.

Bowie is MP for West Aberdeenshire and Kincardine. The Douglas he mentions in his tweet is Douglas Ross, the Scottish Tory leader. All Scottish Tories feel strongly about this issue (see 2.20pm) and minister may be assuming that, as a Scottish MP, he has some licence to speak out about this not available to English ministers.

ShareHunt says ending employee national insurance ‘long-term ambition’ for Tories

With the 2p cut in national insurance being widely trailed, it was not clear this morning whether or not Jeremy Hunt had a surprise “rabbit” to pull out of the hat at the end of his speech. In so far as there was a “rabbit”, it was “the abolition of national insurance”.

This is what Hunt said about employee national insurance, and about the fact that it in effect duplicates income tax.

This is the second fiscal event where we have reduced employee and self-employed national insurance.

We have cut it by one third in six months without increasing borrowing and without cutting spending on public services. That means the average earner in the UK now has the lowest effective personal tax rate since 1975 – and one that is lower than in America, France, Germany or any G7 country.”

Because Conservatives believe that making work pay is of the most fundamental importance, because we believe that the double taxation of work is unfair, our long-term ambition is to end this unfairness.

The Telegraph’s website currently has “Hunt signals the end of national insurance” as its lead headline on its budget coverage.

But the end of national insurance seems unlikely. According to the budget red book, the Treasury raises £168bn from national insurance contributions. This figure includes the revenue from employer national insurance contributions, but that is still a huge amount of money that would have be funded by cuts or “productivity savings” in the public sector.

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Updated at 10.03 EST

Experts voice doubts about Brit ISA

Hunt’s plan for a British ISA is getting a rather lukewarm reaction from the City.

As covered at 1.02pm, it will give savers an extra £5,000 tax free allowance, to be spent on UK assetts. That’s on top of the £20,000 you’re allowed to put into your ISA each year.

Claire Trott, divisional director of retirement and holistic planning at wealth manager St. James’s Place, fears that a British ISA will create more complexity.

Trott says:

“We welcome all opportunities for tax free investment with the ‘British ISA’ increasing the overall ISA allowance. However, it comes with restrictions on where you can invest which may be a turn off for some.

It also adds to the complexity of something that used to be simple, we now have multiple ISAs with various restrictions, which will probably mean more need for financial advice.”

Nimesh Shah, CEO of accountancy firm Blick Rothenberg, also has questions:

Introduction of the British ISA could give someone up to £26k in ISA savings per annum if they are also eligible for the Lifetime ISA.

I question whether we need another form of ISA – wouldn’t it have been easier to increase the £20k ISA allowance which has remained stuck at this level since 2017/18.

Bloomberg’s Merryn Somerset Webb points out that few people manage to put aside £20,000 each year (in this economy?!), so it’s a symbolic gesture really:

And Victoria Scholar, head of investment at interactive investor, points out that the UK stock market has lagged behind rivals

UK stock markets have underperformed their rivals in the US, Europe and elsewhere since Brexit. International investors have shunned the FTSE 100 amid concerns about increased perceived risk and weaker prospects for the UK economy.

The Treasury’s goal with this announcement is to try and drum up support for UK markets which are in the doldrums. Along with Brexit, the so-called Jurassic Park FTSE 100 has suffered from a heavy lack of exciting new tech success stories, in stark contrast to US markets where tech giants from Silicon Valley have largely been responsible for the major outperformance stateside.

ShareWhat you need to know about the new economic forecasts

The Office for Budget Responsibility have released a video to explain their new forecasts.

Key points include:

OBR chief Richard Hughes says:

In his spring budget, the chancellor spends all of this windfall on another 2p cut to national insurance, and another freeze in fuel duty, whose cost is partly recouped by new taxes on vapes, carbon imports and non-doms.

There are no significant changes to the planned level of spending on public services, Hughes adds:

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