Boris Johnson promised to “help people through the current difficult times” as he tried to shift the focus onto the economy rather than the row surrounding his former deputy chief whip Chris Pincher.
The Prime Minister highlighted the increase in the national insurance threshold as the “single biggest tax cut in a decade”.
The changes will see the point at which people start paying national insurance rise to £12,570, partly offsetting the increase in the rate of the tax previously announced to help fund health and social care measures.
The Government says the move will save an average employee around £330 a year, with 30 million people set to benefit.
Opening a meeting of his Cabinet, Mr Johnson said: “It will be in people’s pay packets from tomorrow onwards and amongst other things it is there to help people up and down the country with the cost of living.
“It’s part of the £37 billion that we are able to spend to help people through the current pressures on food prices, on energy prices, that we are seeing.
“It shows that the Government is firmly on the side of the British people.”
He said it showed the Government was using its “fiscal firepower” right now, but “we are also taking the steps that are necessary to bear down on costs in the medium and the long term as well”.
“Reforming our energy market, reforming our housing markets, tackling the cost of transport as we are now, tackling the cost of government, and everywhere always making sure that we get business, get international investors, to come and invest in this country in the way that they are, at an enormous scale,” the Prime Minister said.
Mr Johnson singled out Work and Pensions Secretary Therese Coffey for praise at the Cabinet meeting.
“Tiz (Ms Coffey) did succeed in fulfilling her pledge, she got 500,000 from January off welfare into work. What that did was that saved the taxpayer billions of pounds, it helped employers find the workforce that they need and, of course, it transformed the lives of half-a-million people,” he said.
The Cabinet was meeting following the resignation of Mr Pincher from the whips’ office over allegations he groped two men in a private members’ club.
The Prime Minister is under pressure over his decision to make Mr Pincher deputy chief whip despite previous allegations of inappropriate behaviour.
A former Foreign Office mandarin said Mr Johnson was briefed “in person” about an investigation into the conduct of Mr Pincher when he was a minister at the department.
Lord McDonald of Salford has submitted a formal complaint to Parliamentary Standards Commissioner Kathryn Stone saying the account given by Downing Street was “not true”.