The chancellor's choice between National Insurance and income tax cuts

ITV News' Political Editor Robert Peston explains what measures we are likely to see on Wednesday

The choice to be made tomorrow in the budget by Jeremy Hunt, whether to cut the rate of employee national insurance or the basic rate of tax, is Treasury economics versus Downing Street electoral politics.

The first would reward work and would reduce costs for business (indirectly).

The second would do the same, but would also hand additional cash to core Tory supporters, namely pensioners and those with investment income (from property rentals, share dividends, interest in savings and so on).

Inevitably therefore cutting the rate of income tax costs £2bn a year more than cutting NI for each penny reduction. So bribing more potential voters isn’t cheap.

My hunch, as I said yesterday, is he’ll do a penny off each. But as of now, that is how it smells rather than what I know.

What I know is that 2p in the pound is coming off these taxes on income in some combination or other.

Torsten Bell from the think tank the Resolution Foundation said in a post on X that Jeremy Hunt is "choosing a totally new approach to the shape of tax policy".

He compares Mr Hunt's tax policy to that of former Chancellor George Osborne, saying: "I think everyone who works on tax policy will recognise that Jeremy Hunt's is by far the better tax reform strategy - whatever they think about whether the tax cuts can be afforded in the current climate."

UPDATE 1415:

The Times' Political Editor Steven Swinford is right that Chancellor will tomorrow cut employee national insurance by 2p.

The distributional impact, i.e winners and losers, are interesting. According to the Resolution Foundation, those earning up to £19,000 would be net losers because of freezing of thresholds.

Those earning just under £50,000 would be biggest winners, with net gain of £1200.

Above that threshold the benefits shrink in relative terms. And remember the NI cut hands zilch to pensioners and those with so-called unearned income.

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