Amid lackluster prospects for economic growth, the British government announced it would cut taxes for workers ahead of a general election this year.
Jeremy Hunt, Britain’s top financial official, told lawmakers on Wednesday that he would cut National Insurance, a payroll tax paid by workers and employers that funds state pensions and some benefits, by two percentage points. It would take the rate for about 27 million employees down to 8 percent, and follows a two percentage point cut announced less than four months ago. Together, the cuts would save the average employee about 900 pounds ($1,145) a year, Mr. Hunt said. The rate was also cut for self-employed workers.
“We can now help families not just with temporary cost-of-living support but with permanent cuts in taxation,” Mr. Hunt, the chancellor of the Exchequer, said in Parliament. “We do this to give much needed help in challenging times. But also because Conservatives know lower tax means higher growth.”
Mr. Hunt also announced a sweep of smaller measures, including freezing taxes on alcohol and fuel, proposals to increase productivity in the public sector, and abolishing the tax advantages for foreign earnings of British residents living abroad.
The chancellor has been under political pressure from the governing Conservative Party to lower taxes ahead of the general election, which is expected to take place this year, though a date has not been set yet. The party is substantially lagging the opposition Labour Party in the polls.
But Mr. Hunt’s ability to offer sweeteners to voters has been constrained by the fact that the British economy is growing slowly — if at all. Stretched public services need money and there are calls to invest more in infrastructure. The chancellor also has to meet his self-imposed budget rules, which gave him even less fiscal room to maneuver.
