Tax cuts will plunge thousands into poverty, warn think tanks ahead of spring Budget

Thousands of families will be plunged into poverty if the chancellor cuts national insurance in the spring Budget, think tanks have warned.

On Wednesday Jeremy Hunt will unveil his final Budget before the next general election, where it is widely anticipated that he will cut taxes in a last-ditch attempt to win back voters.

Mr Hunt has hinted that a further national insurance tax cut could be on the cards, as he told Sky News that his last cut of the contribution in the autumn statement in November was a “turning point” and he “hopes to make some progress on that journey” on Wednesday.

But now two think tanks have warned the chancellor against further reductions. They say poorer households will benefit little from the tax cut while suffering a sharp drop in the services on which they rely.

The Institute for Public Policy said that a further 2p cut in the pound would cost the government £10.4bn, and almost half of that would end up in the pockets of the richest 20 per cent of households, while a meagre 3 per cent of the funding would benefit the poorest 20 per cent of families.

The progressive think tank’s analysis also shows a disproportionate regional inequality, meaning that households in London would receive £608 on average, whereas households in the northeast would see average gains as low as £342.