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Thursday, Jul 03, 2025

Chancellor Contemplates Additional National Insurance Cut to Alleviate Pressure on Rishi Sunak

Chancellor Jeremy Hunt is considering another cut to national insurance to relieve pressure on Prime Minister Rishi Sunak and move past internal Conservative unrest.
The government hopes to alleviate tension over Sunak's immigration policies and leadership disputes by focusing on tax cuts for their election strategy. As the budget approaches in March, the Treasury is assessing potential tax cuts, notably to stimulate work and economic growth.

Last year, national insurance was cut from 12% to 10%, saving the average worker £450 but costing the Treasury £9 billion annually.

On Tuesday, Hunt will review preliminary economic forecasts to determine the feasibility of additional tax cuts. Reducing employee national insurance is a particular focus, aiming to encourage job growth without affecting pensioners protected by the state pension triple lock.

The Chancellor also contemplates extending child benefits to higher-income families, potentially appeasing voters in vulnerable Conservative areas. The plan may change the current income thresholds, which start reducing benefits for earners at £50,000, and remove them entirely for those making £60,000.

Recent polls indicate a significant lead for Labour, causing concern among Sunak's supporters who face ongoing party infighting. Some allies urge firm action against party members undermining the leader, suggesting removing their party membership to deter such behavior.

Sunak's camp is also responding to threats of a continued campaign against him by a faction that prefers former Prime Minister Boris Johnson's leadership.

They are particularly interested in identifying the financiers behind polls predicting a Labour victory, which critics of Sunak's leadership have used to argue for a rightward shift.

Despite the possibility of losing upcoming byelections and facing tough local elections, the budget presents an opportunity for Sunak to present a strong fiscal plan, encouraging voters with strategic tax cuts and economic incentives.

However, Hunt is not keen on revising the government's fiscal rules before the election, even while handling the challenge of Labour's significant investment commitments in their green agenda.
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