Jeremy Hunt has unveiled tax cuts for workers starting from April, aiming to bolster Tory prospects.
The chancellor reduced National Insurance by 2p in the latest spring Budget preceding the upcoming general election.
Labour criticized the move, branding it a "con" that would negatively impact many individuals.
The Budget also featured hikes in child benefit salary thresholds and a new levy on vaping, while eliminating non-dom tax status.
This 2p reduction in National Insurance marks the second cut by the chancellor this year. Mr. Hunt argued that it would promote fairness in the tax system and aid economic recovery.
Chris Mason: Tax Cuts Pose Dilemma for Labour However, Labour leader Sir Keir Starmer, although supporting the cut, emphasized that it would not offset tax threshold freezes, ultimately resulting in increased income tax for some individuals over time.
He noted that taxes were at a 70-year peak, and people had experienced a significant decline in living standards in recent years.
Read more on the Budget
A summary of the key points What does the Budget mean for you? How much will the National Insurance cut save me? Child benefit to be paid to more families Households worse off despite tax cuts - think tank
Mr. Hunt had been under pressure to reduce personal taxes as the Tories lagged significantly behind Labour in opinion polls ahead of the forthcoming general election, expected later this year.
The January cut to National Insurance, announced during last year's Autumn Statement, failed to deliver the polling boost hoped for by Tory MPs.
Speculation mounted before the Budget that the chancellor would opt for income tax cuts, which are believed to have a more substantial political impact with voters.
Despite this, he announced a widely anticipated 2p reduction in National Insurance (NI), lowering the rate for employees from 10% to 8%, and from 8% to 6% for the self-employed.
He also extended eligibility for child benefits to approximately 170,000 families, with individuals earning up to £60,000 receiving full benefits and the threshold for complete withdrawal raised to £80,000.
Mr. Hunt stated that the NI change would equate to £450 annually for an employee with an average salary of £35,000.
In an interview with BBC political editor Chris Mason, he expressed his long-term ambition to abolish National Insurance entirely but noted that this would only occur when it is "affordable."
To raise revenues elsewhere, he adopted two of Labour's flagship policies: replacing the non-dom regime for UK residents whose permanent home is overseas and extending the windfall tax on oil and gas companies until 2029.
The party had earmarked additional revenue from these policies to fund new breakfast clubs and additional hospital appointments.
Labour has emphasized that freezes in income tax thresholds, slated until 2028, will result in an increased tax burden for many individuals. They also pointed to "stealth" rises in council tax.
Sir Keir said in the Commons that the chancellor was attempting to "give with one hand, take even more with the other."
He added, "The whole country can see exactly what is happening here. They recognize a Tory con when they see it."
Liberal Democrat leader Sir Ed Davey labeled the Budget a "last-ditch attempt from the Conservative Party to cling on to power," adding that it "reeks of desperation."
He further stated, "Never before have I seen a government deliver weaker public services, higher taxes, and zero growth all at the same time."
Former ministers Suella Braverman and Sir David Davis expressed regret that the chancellor did not opt to cut income tax.
Mrs. Braverman, who was dismissed by the prime minister last year, also stated that frozen income tax thresholds had resulted in "millions of low and middle-income workers being dragged into paying higher tax," while "unprecedented levels of low-wage, low-skilled migration" were harming the economy.
"The government could have addressed both issues today but chose not to," she said.
Tax Threshold Changes
The Institute for Fiscal Studies, a think tank, reports that the combined impact of NI cuts and threshold freezes between 2021 and April benefits those earning between £26,000 and £60,000.
However, individuals earning less than £25,000 are worse off, while those earning £60,000 to £120,000 will see minimal difference.
In addition to adjusting child benefit thresholds, the chancellor announced a consultation on transitioning to a system that uses household, rather than individual, income by April 2026.
The current system has been criticized as unfair because the threshold is based on the highest-earning parent, rather than a family's combined salary.
This means that a family where both parents earn £50,000 each can receive the full amount, whereas a single person earning £60,000 would receive nothing.
'Turn the Corner'
The Budget comes amid sluggish economic growth, with the country slipping into recession at the end of last year.
However, Mr. Hunt expressed confidence that the economy would "soon turn the corner," with growth forecasted to exceed expectations over the next two years.
The government's independent forecaster, the Office for Budget Responsibility, also predicts that inflation - the rate at which prices are rising - will fall to the target rate of 2% before the end of June.
This suggests that the government may wait until autumn to call an election, which must be held by the end of January 2025, rather than calling a May poll.
By then, the economic situation is likely to have improved, providing another opportunity to reduce taxes.
In other measures announced in the Budget:
-The Household Support Fund, assisting those struggling with cost-of-living pressures, will continue for another six months. -A freeze on alcohol duty, set to end in August, will be extended until February 2025. -A new tax on vaping products will be introduced from October 2026. -Tobacco duty will increase by £2.00 per 100 cigarettes at the same time to ensure vaping remains cheaper. -Fuel duty is frozen again, with the 5p cut in fuel duty on petrol and diesel, due to end later this month, kept for another year. -Tax breaks for owners of holiday let properties will be eliminated.
The move to extend the windfall tax on energy firms has sparked backlash from some Tories, with Energy Minister Andrew Bowie and Scottish Conservative leader Douglas Ross describing it as "deeply disappointing."
SNP economy spokesman Drew Henry also criticized the move, stating that both the government and Labour were "intent on pulling the rug from under industry's feet."
He added that a "just transition from oil and gas" would not happen "if we squeeze the life out of the sector overnight."
Regarding public services, the chancellor stated that he would maintain the planned increase in day-to-day spending at 1% above inflation annually until 2029.
However, as some departments like health and schools have protected budgets, others such as justice and local government may face significant budget cuts.
Mr. Hunt stated that the public sector would need to enhance efficiency to deliver better value for taxpayers.
He announced investment in new technology to help free up time for doctors, nurses, and police, including £3.4 billion to modernize NHS IT systems. Photo by Richard Townshend, Wikimedia commons.