Hunt Eyes Extra UK Payroll Tax Cut as Election Draws Closer

(Bloomberg) -- Chancellor of the Exchequer Jeremy Hunt said he’ll cut UK national insurance for a third time in the autumn if economic circumstances permit, as his governing Conservatives seek dividing lines with the poll-leading Labour Party on tax despite presiding over the highest burden in decades.

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Britain’s finance minister has already cut the payroll tax by 4 percentage points over his two most recent fiscal statements. On Friday, he said he’d like to go further and reiterated a long-term goal to eliminate the levy altogether. With a UK election expected this year, the cuts are part of a strategy to try to reassert traditional Tory claims to be the party of low taxation.

“If we can afford to go further responsibly to reduce the double tax on work this autumn, that is what I will do,” Hunt said in a speech on Friday, referring to national insurance and income tax. “We make no apology for wanting to keep cutting the double tax on work until it’s gone.”

Hunt’s speech signals that while no date has yet been set for the general election — which must be held by late January — the campaign is already truly under way. He spoke in front of a backdrop emblazoned with “Labour’s Tax rises” in large red letters, and the event in central London bookends a week of electioneering that began with Prime Minister Rishi Sunak using his own campaign speech to say the country would be less safe under Labour.

In between, Keir Starmer on Thursday unveiled six “first steps” for a Labour government, including a promise to “deliver economic stability.” He made no promises on tax — though the party has previously pledged not to raise the three main levies — income tax, national insurance and value-added tax.

Hunt said his determination to reduce taxes represents the “big choice” facing voters, and accused the opposition party — which has held a stubborn poll lead of about 20 points or more for months — of pursuing policies that would lead to £59 billion ($75 billion) of tax rises over 4 years.

But he’s on shaky ground himself, after he and Sunak put the UK tax burden on track to its highest level in 70 years, damaging the Tories’ preferred branding as a low-tax, low-regulation party. That record makes for tricky politics, with Hunt arguing that voters should judge the Conservatives based on future plans.

He said Labour’s criticism of the Tory tax rises amount to “playground politics” because the Treasury needed to pay for pandemic-era policies and subsidies for households facing surging energy prices.

“Conservatives recognize that whilst those tax rises may have been necessary, they should not be permanent. Labour do not,” he said.

The attempts at point-scoring have come to a head over defense spending, after Sunak promised to raise it to 2.5% of economic output by 2030. Starmer — despite having already said he’d target that figure — refused to match Sunak’s timeline, arguing the Tories had not shown how it could be paid for.

Hunt called Starmer’s refusal an “absolute scandal.”

The double-pronged Tory attack on Labour illustrates how the Conservatives are increasingly vulnerable in two areas — the economy and defense — which they’ve traditionally regarded as electoral strengths.

YouGov polling of British voters shows that the Tories have only a 2 percentage-point advantage over Labour when asked which party is best at handling defense — down from over 30 points just over four years ago. Meanwhile on the economy, Labour have overtaken the Tories and now have a 7-point lead, having also trailed by more than 30 points in early 2020.

Buoyed by those numbers, Starmer’s party has been trying to portray the Tories as being irresponsible in seeking to abolish national insurance, describing it as an unfunded £46 billion pledge that would ultimately hurt pensioners. Hunt reiterated that ambition on Friday, and lashed out at Labour’s criticism.

“It is fake news and an absolute disgrace to try and win this election by scaring pensioners,” Hunt said. “We haven’t put a time limit on it because it will depend on factors that are beyond our control.”

(Updates with details, further comment from Hunt starting in fourth paragraph.)

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