Leading economists suggest that Jeremy Hunt may consider cutting another 2p off National Insurance, as he has £12 billion more in "fiscal headroom."
The Institute for Fiscal Studies noted that the state of public finances entering the new fiscal year 2024/25, coupled with future projections, suggests that the Chancellor could implement a third 2p reduction to National Insurance. This move might occur just before an autumn general election, while still adhering to one of his key rules.
The Institute explained that with the onset of the new tax year on 6 April, the UK's forecast horizon extended by a year.
Consequently, the Government's fiscal mandate, which demands a decrease in debt as a proportion of national income between the fourth and fifth years of the forecast period, now extends an additional year into the future.
The IFS estimated that this "mechanical rolling forward" of the forecast could, "all else equal," potentially increase the Chancellor's fiscal "headroom" by around £12 billion against his fiscal mandate. Leading economists emphasised that, "on the face of it," this adjustment could pave the way for a third 2p cut to National Insurance as part of a pre-election giveaway.
However, they argued against “immediate and permanent tax cuts” especially given that the Government’s economic plans are based on “large, unspecified spending cuts in the next Parliament”.
