- By Chris Mason and Kate Whannel
- BBC politics
March 5, 2024, 17:44 GMT
Updated 1 hour ago
Image source: Getty Images
Jeremy Hunt is expected to announce a 2p cut to National Insurance when he delivers his Budget on Wednesday.
Mr Hunt has been under pressure, particularly from Tory MPs, to cut taxes, which are currently at historic highs.
Labor said any cuts would be wiped out by the government's previous decision to freeze the thresholds at which people pay tax.
The move means that a raise is more likely to cause someone to move into a higher pay bracket, meaning they pay more taxes.
Social security contributions are paid by employees and the self-employed as well as by employers on their income.
The amount paid depends on a person's salary.
The focus of Wednesday's cut is expected to be on workers rather than employers, as was the case in the autumn statement when the key interest rate was cut to 10% from 12%.
A further 2p cut would be worth around £450 a year for someone on a full-time salary of £35,000.
In his Budget statement in the House of Commons on Wednesday, Mr Hunt is likely to argue that rewarding work and putting more money into people's pockets is a driving motivation for the government.
However, this comes against a backdrop of sluggish economic growth as the country fell into recession late last year.
The Chancellor has also stressed in recent weeks that his scope for tax cuts is not as great as he had hoped given the rise in borrowing costs.
Cutting Social Security is cheaper than cutting income taxes; But some Conservative MPs fear it will be less well understood by many voters and therefore less politically advantageous.
They have also argued that the initial cuts to social security have not improved the Conservatives' political chances – an important consideration given a general election expected this year.
Labor also believes the government has more room to maneuver than ministers suggest, and may also cut income tax.
Labor leader Sir Keir Starmer will argue in his Budget response that tax cuts now still leave people worse off because tax thresholds are frozen, meaning many people are paying higher tax rates than before.
As well as the expected cuts to National Insurance, Mr Hunt will freeze fuel duty for another year. The levy has not increased since 2011.
The BBC was also told that Mr Hunt will use his budget to push councils to reduce their spending on diversity programs and consultants.
It comes at a time when councils across the country have said they are struggling to balance the books.
This week councils in Birmingham and Nottingham announced major cuts to services.
The Local Government Association has dismissed attacks on diversity programs as a “distraction”, arguing that councils have spent “pence” on such projects.
Persons with non-domicled status are UK residents whose tax residence is abroad. Under the current system they don't have to pay UK tax on money they earn abroad.
Labor has committed to abolishing non-dom status and spending the money raised on schools and the NHS.
Should the party support the tax cuts announced by the Chancellor, as it is expected to do, it would leave questions about how some of its spending promises will be financed.