Jeremy Hunt cut national insurance for 27 million workers as he delivered an autumn statement that he claimed would bring tens of thousands more people into work.
The Chancellor said the two-percentage-point reduction would save someone earning £35,000 more than £450.
But millions of workers will face a squeeze on their finances with the tax burden still set to reach a record high, with the Treasury raking in £200bn as starting thresholds remain unchanged.
With an election expected next year, the national insurance cut will be rushed through Parliament to boost Rishi Sunak’s chances.
The Office for Budget Responsibility also significantly downgraded its growth forecasts, with the economy now expected to grow just 0.6 per cent this year and 0.7 per cent next.
Mr Hunt raised the National Living Wage to £11.44 an hour, kept the pensions triple lock and vowed to increase in-work benefits by 6.7 per cent.
Labour said growth had hit a dead end under the Conservatives.
And campaigners accused the government of punishing people by framing disability as a lifestyle choice as he announced a crackdown on benefits for people with mobility or mental health struggles unless they work from home.
