'A last desperate act'

Tax at highest level since 1948, despite 2p national insurance cut | Starmer condemns budget as reflection of ‘failed’ Tory party

- Larry Elliott, Pippa Crerar

Britain will go into the next general election with taxes at their highest level since 1948 despite Jeremy Hunt’s 2p budget cut in national insurance – and with the threat of a fresh squeeze on public spending to come after polling day.

The chancellor used a comb ination of higher borrowing and a range of stealth taxes to fund a £14bn giveaway package and said his ambition was to phase out national insurance (NI) contributions for employees and the self-employed altogether.

But the lack of any real surprises in the budget – other than an increase in the child benefit threshold to £60,000 – appeared to reduce significantly the prospect of a snap general election in May, when the UK will still officially be in recession.

Many Conservative MPs had been hoping for a headline -grabbing fiscal statement that would leave people feeling better off and help close the gap with Labour in the polls, acting as a launch pad for the election .

However, living standards remain squeezed and millions of people face being dragged into higher tax bands, while the Offi ce for Budget Responsibility (OBR) showed incomes would remain below their level at the last election by the end of this parliament.

Hunt’s heavily trailed 2p cut in national insurance will be funded by scrapping non-dom rules – a fl agship Labour policy – and other revenueraising measures that will push taxation to the highest level since the second world war.

“We will continue to cut national insurance contributions as we have done today so we truly make work pay,” Hunt told MPs. “We stick to our plan with a budget for long-term growth; it delivers more investment, more jobs, better public services and lower taxes.”