We’ll know tomorrow afternoon what exactly Jeremy Hunt has included in his Budget, but reports this evening suggest we’re looking at another 2p cut to employee National Insurance: a move that is estimated to put £450 back in the pocket of the average worker, which Hunt will try to sell as a £900 tax cut, if you combine it with the additional 2p taken off NI in his Autumn Statement last year.

The decision to opt for NI will be driven by fiscal restraints rather than political desire. Tory MPs, and workers, have been expecting something bigger than what was already delivered last autumn, and an income tax would have fit the bill. Furthermore, Rishi Sunak made clear when he ran for the leadership back in summer 2022 that he wanted to focus on income tax cuts, pleading to reduce the basic rate from 20p to 16p over the next parliament.

But Hunt has been working with far less fiscal headroom than he thought he’d have at the start of the year, and income tax cuts are expensive: £7 billion for every 1p off income tax, compared to roughly £5 billion for every 1p off NI.

What happens to the overall tax burden?

The Chancellor can try to justify the downgrade to his tax cutting plans by insisting it fits his narrative, started last year, that tax cuts are part of creating a better incentive to work. Moreover, the government has insisted for over a year that income tax cuts can be inflationary. It’s a point that has always been disputed – a relatively minor income tax cut is unlikely to lead to a spending boom when inflation outpaced wages for so long – but it’s a talking point we can expect the government will double down on if ministers opt for NI tax cuts instead.

But will the country buy it? Hunt’s first round of cuts to National Insurance didn’t see any movement in the polls. The government may be banking on more time for the benefits of these tax cuts to be fully felt by workers, who have only just started to see the benefits in their take-home pay. The problem remains that these tax cuts are being offset by tax rises elsewhere, as freezes to tax thresholds pull millions of workers into paying tax, and millions more into paying the higher rate.

This is why the big question tomorrow remains: what happens to the overall tax burden? Whether Hunt opts for an income tax cut or a NI tax cut, he runs the risk (as he did in the Autumn Statement) of being accused of raising taxes. Despite the 2p off NI last November, the tax burden didn’t budge, remaining on track for tax receipts as a percentage of GDP to hit a post-war high in 2028-29. This makes it very difficult for the Chancellor – or indeed the Prime Minister – to claim they are cutting taxes as they head towards an election. If they want to claim they are the party of tax cuts, the tax burden has to be falling. Income tax cut or NI tax cut: the government can’t be giving with one hand and taking with another.

Listen to today’s episode of Coffee House Shots, where Kate Andrews, James Heale and Isabel Hardman look ahead to tomorrow’s budget: