Boris Johnson refused to stop a proposed increase in National Insurance for millions of workers, insisting that it was the best method to finance the NHS.
The Prime Minister is being urged to rethink the proposed 1.25 per cent rise, which is due in April when households face a perfect storm of rising energy bills, council tax and inflation.
The Daily Mail has joined forces with a number of Tory business leaders, economists and MPs to call on the Government not only to delay but also scrap the plan by Chancellor Rishi Sonak.
Last night, it was also suggested that Mr Johnson’s entire Cabinet would support delaying controversial national insurance increases to assist families affected by the cost-of-living crisis.
The PM, however, refused to relent when he visited a Milton Keynes hospital today.
When asked by radio presenters if they would allow the price rise to continue in the face cost-of-living pressures, Boris Johnson responded: ‘The NHS is doing an amazing job, but it’s been under terrible strain.
“Listen to me: That money has to be put in. This investment is necessary for our NHS.
“What I’m trying to tell people is this: If you want your fantastic NHS to be funded, you have to make the payment – and this Government has made it clear that they will.
During a recent visit to Milton Keynes’ hospital, the PM did not back down amid demands for the NI hike to be halted or reversed.
Boris Johnson and Rishi Sonak. The Mail on Sunday reports that Tory MPs have met with the Chancellor to discuss the crisis of the cost-of-living and were ‘left feeling’ that he was trying to distance himself form the hike.
A senior minister claimed last night that the Cabinet would have no objection if Mr Sunak stopped the increase.
The Cabinet would not object to the proposal of the Chancellor to repeal the rise in national insurance payments.
“There would not be any objections from the Prime Minister because it is very much a Treasury strategy.”
Minister to the Cabinet added that it was not the right time for raising taxes. Before we can begin to work out how to balance the budget, we need to see a recovery from Covid. It is now in the hands of the Chancellor.
Nadhim Zhawi, the Education secretary, stated that raising national insurance to cover social care costs is a ‘right thing to do.
He told BBC Radio 4’s Today programme: ‘On the national insurance, the £36 billion is necessary because successive governments… of every colour have not dealt with this.
“It’s important to keep in mind that only the top earners (the 14 percent who make the most) are paid 50 per cent. They are contributing half the amount. The lowest earners (6.1 million of those lowest-earning earners) are not paying any. This is a serious problem for many people.
“So, it is very important to focus only on why we do this and why I believe it is right to do it. It will eventually create a sustainable system of adult social services that can be sustained without breaking the families.
Asked if he thought the proposed move would shock the economy, and thereby prevent the anticipated tax increase from occurring, Zahawi said: ‘I think Treasury have done all the work. It is the right decision.
“We will, of course, review any policy we implement – if it doesn’t work then we will examine it. It is the right thing.
But on the same programme backbencher and former minister David Davis, who last week called for Prime Minister Boris Johnson to resign, said the rise would remove about 10 per cent of the disposable income of ‘ordinary families’ and was based on the ‘wrong data’.
He also argued that the national insurance rise was ‘economically unwise’ because it created a ‘disincentive to work’, would ‘penalise employers’ and ‘hit the growth of the whole economy’, meaning it would be unlikely to raise the £36 billion forecast by the Treasury.
The national insurance increase, which was announced last autumn, will raise £12billion to £13billion a year for the Treasury.
Although it was originally intended to fund social and health care, the majority of the funds for the first three year will be used to clear the post-Covid NHS backlog.
Yesterday, Dominic Raab, Deputy Prime Minister, appeared to disengage himself from this policy but reluctantly stated that it should be in force by April.
Times Radio interviewed him and he said, “I’d rather not have to do that.”
“But we must, considering the current pandemic and the wilting of our public finances. What I don’t want to do…is duck the social care issue, like successive prime ministers and governments.
Touker Sulman claimed that a NI hike would leave families with ‘painful choices’, forcing them to make ‘food or heat’ or if they want to fix their car.
“We are making sure that we address the challenges of dementia and the ageing population. This is our first prime minister, the government that grasped the nettle. We should not be slow in implementing this crucial social reform.
The Mail on Sunday reports that Tory MPs have had to meet the Chancellor over the crisis of the cost-of-living and were ‘left with an impression’ that he wants to distance himself form the hike.
According to a source, Raji called it “the Prime Minister’s Tax”, which was quite apt to say the least. The impression was that he wasn’t interested in being associated with it.
Kwasi Kwarteng (Business Secretary) stated that in July the government should not increase national insurance contributions to help pay for social assistance. Jacob Rees Mogg (Commons Leader) said this month, however, that the government cannot justify the rise while families struggle to pay for it.
A Government source stated last night that the Government was determined to reform social services, something which had been evaded too long.
National Insurance card. A National Insurance card.
It is April when the proposed 1.25 Percent increase will take effect. That is when homeowners face an unprecedented storm of increasing energy bills, rising council tax, and inflation.
“The NHS is essential to this goal and ensures that the NHS has the money it needs to overcome the financial backlogs resulting from the pandemic.
Robert Halfon, Tory MP, was chairman of the Commons education panel and joined an outcry for the increase to be reexamined yesterday.
He added: “I’d like the Government take another look at it completely, but I recognize that the public wants us to spend more money on the NHS as well as social care.”
Political and business opposition to the rise is growing, with concerns it will hit pay packets just as energy bills soar – and hamper small firms trying to recover from Covid.
UKHospitality’s chief executive Kate Nicholls stated last night that the timing for the increase was ‘perfect’ in a post-Covid recovery.
She said: “It’s clear that the rise in NICs both for employer and employee will have a substantial impact on hospitality sector.”
Director of National Institute of Economic and Social Research, Professor Jagjit Chadha said that stopping the increase in the budget would be possible and makes a lot of sense.
A Government spokesman said last night: ‘We’ve taken decisive and historic action, with our health and social care levy due to raise around £13billion a year. People across the country will reap the benefits.
Panellist for Dragons’ Den TOUKER SULEYMAN says that tax increases are not morally right and could lead to the collapse of the economy.
With innovative solutions like the furlough program and bounce-back loan, the Government did a remarkable job supporting families and businesses during the Covid crisis.
It is therefore surprising and disappointing to see it attempting to reverse much of the good work it has done by insisting on a 1.25 percent increase in the national insurance right at the wrong time.
It will be effective in April, the month when the energy price cap ends. This could trigger a 50 percent increase in fuel prices. No exaggeration is made when we say that the economy is in a perfect storm.
Touker Sulman was a Dragons’ Den panellist. He stated that an NI rise would result in employees being out of pocket by hundreds of pounds, and families having to make difficult decisions.
Inflation – already at a 30-year high – is likely to rise to six or even seven per cent as a result of the spiralling cost of domestic fuel and this will create a cost-of-living crisis that will have devastating effects on millions.
Mortgage repayments are increasing too as the Bank of England raises interest rates in a bid to – ironically – curb inflation.
These increases affect everyone, but they hit working people – those who will be affected by the NI rise – hardest. Farmlough also saw incomes drop for those who did not lose their jobs in the last year.
This is a time of anxiety, and these repercussions are likely to continue for many months or even years. Do we have the right time?
A NI increase will result in employees being hundreds of pounds short of their wages. Some families face difficult decisions: heating and food, or new shoes or cars for their children. They, and the economy, don’t need another financial hit.
The Government must find money to pay the rising cost of the NHS. I also understand the need for funding social services. However, these problems have been with us for many decades and will require years of resolution.
The economy is in such an unstable state that it’s not the right time to fix them by imposing a tax on job opportunities. This is both morally and economically wrong.
Not only will it undermine recovery, I fear it could easily tip us into recession, since the blow will fall on both employers and employees, hitting small businesses – the lifeblood of the British economy – particularly hard.
You don’t need to believe me. The highly respected Centre for Economics and Business Research estimates that a typical small business with 50 employees could end up paying an extra £10,000 to £20,000 annually, potentially deterring them from taking on new staff.
According to Mr Suleyman, “I cannot assume that the Chancellor (pictured below) hasn’t spoken with anyone in the commercial sector lately. Because if he did, he’d know we’re all very worried.”
This would lead to national job losses of many thousands, and people who are employed will face pay freezes that, when combined with inflation, could result in pay reductions.
The domino effect of less spending on people is detrimental to businesses. Reduced spending in restaurants and shops means lower income from income tax or VAT
The Government – as well as the rest of us – will end up poorer if it goes ahead with its plan.
Many businesses already face post-pandemic challenges. Shops, restaurants, transport firms, and others will still be affected by the desire of many employees to continue working at home.
This could lead to many people falling apart if it isn’t accompanied by long-term challenges, such as high business rates and punitive measures.
It is my belief that the Chancellor hasn’t spoken to any commercial people lately. If he did, he would be aware of our deep concerns.
I talk to fellow business leaders all the time – not one of them is anything but anxious and appalled by this imminent tax increase.
The economists who advised Rishi Sunak on the design of this device were months back, just before Omicron was a more calm and peaceful time.
Nobody expected that a new version would hit pre-Christmas. But it did – and hard.
Retail and hospitality workers saw Omicron’s impact immediately. We are also seeing Omicron’s impact on trade due to rising energy costs, mortgage rates, and other factors that have forced customers to make cuts and put off buying new items.
You have the recipe for disaster.
We are currently reviewing the salaries of our staff to determine how we can assist them. However, not all businesses can do this and the situation will only get worse as inflation keeps rising.
Yesterday, Dominic Raab, Deputy Prime Minister, appeared to disengage himself from this policy but reluctantly stated that it should be in force by April
It does not directly control rising fuel and energy costs, global inflation, or transport prices. It does however have control over the timing and tax of any tax increases.
Treasury should show the same agility and flexibility as it did during the pandemic, and adjust to the circumstances by delaying the NI increase instead of continuing.
You can keep it under review for up to six, nine, or longer until you feel the crisis in cost of living has passed.
Unprecedented times have characterized our lives. These unprecedented times require extraordinary measures to maintain the economy’s health.
By encouraging workers to return to their jobs, the government is doing what’s right.
People are back in shops and streets since Plan B was suspended.
If the Government pushes for an NI increase, then those steps back towards recovery will be reversed.
The average person feels financially strapped. They cut back their spending and demand falls. Businesses have to lay off employees.
So recession is born. And with recession comes reduced tax revenues and that’s bad news for the NHS and social care – the very services that the NI rise is supposed to help.
Businesses and people need to be able to bounce back. An NI rise will cripple them – and the economy instead.
You can still adapt and postpone the NI increase. It is my hope that the chancellor will do the right thing.