Rishi Sunak has signalled the UK government favours a further cut to National Insurance rather than income tax in next week’s Budget, as he attacked Humza Yousaf’s “tax and axe” spending plans.

The Prime Minister said reducing National Insurance was “a union tax cut” that also benefited Scotland, where much of income tax is devolved. It came as he said the Scottish Government’s own spending plans made Scotland “the high-tax capital of the UK”.

There has been growing speculation that Mr Sunak and Chancellor Jeremy Hunt will seek to make tax cuts in the March 6 Spring Budget.

Prime Minister Rishi Sunak speaks during the Scottish Conservative conference in Aberdeen. Picture: Jeff J Mitchell/Getty Images

Mr Hunt announced a 2p cut to National Insurance as part of last year’s Autumn Statement, reducing the main rate from 12 per cent to 10 per cent from the start of this year. A further cut of 1 per cent would cost £4.5 billion per year.

In Scotland, First Minister Humza Yousaf chose to hike income tax for higher earners in the Scottish Budget, which was voted through Holyrood earlier this week.

Speaking to journalists at the Scottish Conservative conference in Aberdeen on Friday, Mr Sunak was asked whether the UK government would take into account the fact Scots would feel the benefit of a National Insurance cut, but not income tax changes.

He said: "I'm sure people will appreciate that I can't comment on any fiscal policy in advance of the Budget, but to your broader point, the Chancellor and the UK government chose to cut National Insurance.

"Lots of reasons for that, but first and foremost, it is a tax on work, and I believe in a country and society where hard work is rewarded. That's something that's really important to me, it's important to Douglas [Ross, the Scottish Tory leader], Alister [Jack, the Scottish Secretary], to all the people in the government."

He added: "It's also important to us to be a government that delivers for people in every part of the United Kingdom. And I'm very conscious that while the SNP is making life harder for hard-working people by putting their taxes up, I want to make life easier for people.

"I want to give them the peace of mind that there's a brighter future for them and their families. So by cutting National Insurance, and by delivering that tax cut incredibly quickly, millions of people in Scotland started benefiting in January, and that is a significant tax cut worth £450 for someone on average earnings of £35,000.

"And you're right, it is a union tax cut, it's a tax cut for everyone in work, and the contrast between what we're doing and what the SNP Government is doing could not be starker."

The Prime Minister said Mr Jack “does make that point to the Chancellor, just to reassure you on that as well”.

The Scottish Secretary, who was sitting beside Mr Sunak, added: "For the very reasons outlined, I press hard that it's National Insurance as opposed to income tax."

Elsewhere, Mr Sunak said the SNP’s "obsession with independence means that the day-to-day public services that people care about aren't getting the attention that they deserve”.

He said: "NHS funding is going down in real terms this forthcoming year in Scotland. Scottish schools are plummeting down international league tables.

"That is failing a generation of young Scottish children. Scottish schools used to be the envy of the UK. In England, schools are marching up those league tables because of reforms that we've done, because of our focus on kids' education."

He said the recent Scottish Budget was “rightly described by Douglas and the team as a tax-and-axe budget, because that's what you saw”.

Mr Sunak said: "The SNP have made Scotland the high-tax capital of the UK. Anyone earning more than £28,000 in Scotland is now paying higher tax than they would be in England. While the SNP are busy raising taxes on hard-working people, the Conservative UK government is cutting them.

"Because of the progress we've made on the economy, halving inflation, mortgage rates starting to come down, confidence rising, we've been able to cut taxes for everyone in work across the UK, and that kicked in at the beginning of this year.”

The Prime Minister added: "I believe in a country where hard work is rewarded, and we've always said where we can responsibly do so, of course we wanted to cut people's taxes when inflation was on a downward trajectory, which it now is.

"I'm pleased the Chancellor was able to deliver that in November and I'm pleased that we were able to deliver it on a UK-wide basis. This is a government that wants to deliver that for people across the country.

"The contrast with the SNP could not be starker when it comes to taxation. And it's not just hard-working people, it's small businesses. A typical pub in Scotland is paying business rates now that are three times the level of a pub in England."

Mr Sunak said pubs, restaurants and cafes “are all paying thousands of pounds more in business rates than their equivalent businesses in England”.

He said he expected his party to make gains in Scotland at the next general election, despite recent polling. A Survation poll released on Friday showed the Tories in Scotland would drop to 15 per cent support at the next election – the lowest rating since immediately after Liz Truss’s mini-budget.

But Mr Sunak said: “I think come the election – because that’s ultimately the only one that matters – I think we expect to gain when it comes to Scotland and that’s because our message resonates.”

SNP Westminster leader Stephen Flynn said: "The Tories have trashed the UK economy, slashed Scotland's budget and sent the cost of living soaring. Rishi Sunak should have used his flying visit to apologise to families across Scotland who are skint and scunnered as a result of his government's appalling record of failure.”

Rishi Sunak signals National Insurance 'union tax cut' as part of Spring Budget and attacks Scottish Government’s ‘tax and axe’ plans

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