Hunt reveals £20bn in tax cuts as Tories move on to election footing

Chancellor announces higher than expected 2p cut in national insurance

- Larry Elliott, Pippa Crerar

Jeremy Hunt sought to blunt the impact of the highest levels of taxation since the second world war yesterday with a cut in workers' national insurance contributions, fuelling speculation about a snap spring general election.

With the Conservatives trailing in opinion polls, the chancellor used a fresh squeeze on public spending to pay for a bigger-than-expected reduction in national insurance conributions (NICs), worth £450 a year to the average employee, coupled with permanent 100% investment breaks for business.

Leading thinktanks said that what Hunt called the "biggest tax cut on work since the 1980s" was based on unrealistic assumptions about the ability of already squeezed government departments to cope with a fresh dose of post-election austerity.

Hunt said his £20bn of tax cuts were possible because the economy had "turned the corner" even though the government's own watchdog the Office for Budget Responsibility (OBR) - said growth would be weaker and inflation higher next year than it had predicted at the time of the budget in March. Living standards would be 3.5% lower in 2024-25 than they were before the Covid-19 pandemic, it warned.

Highlighting that the government was now on an election footing, Hunt also raised state benefits by 6.7% from April and handed pensioners a £900 a year boost by delivering the triple lock in full. In the weeks leading up to the autumn statement, the Treasury had been toying with the idea of raising welfare payments by 4.6% and excluding bonuses from the calculation of the triple lock.