Britain Is Cutting Taxes Again. Why Now?

At least once a year, Britain’s top financial official stands up in Parliament to lay out his — it has always been a his to date — tax and spending plans that are normally intended to bolster economic growth and keep a check on the nation’s debt. This year, Jeremy Hunt, the chancellor of the Exchequer, had to consider another priority: the upcoming general election.

And so on Wednesday, Mr. Hunt announced that he would cut taxes for nearly 30 million workers. Beginning next month, the rate of National Insurance, a payroll tax paid by workers and employers that funds state pensions and some benefits, will be cut by two percentage points for employees and self-employed workers. It will save the typical employee about 900 pounds ($1,145) a year, Mr. Hunt said.

How did the markets react?

A year and a half ago, tax cuts and a plan to turbocharge economic growth sent shock waves through financial markets and ultimately pushed Liz Truss out of her job as prime minister. This time, the British pound and government bonds hardly budged.

That’s because the tax cuts announced by the Conservative Party are smaller and, crucially, offset partly by some other tax increases. And Mr. Hunt didn’t announce much additional spending.

The policy changes were also accompanied by forecasts of their economic and fiscal impact by the Office for Budget Responsibility, an independent watchdog.