Lord Frost last night declared that April’s increase in national insurance must be scrapped, to aid the economic recovery.
In a significant intervention, the Prime Minister’s former Brexit chief insisted the £12billion tax grab was not needed.
The peer, who resigned last year amid concern over the direction of Boris Johnson’s administration, said scrapping the increase was vital in the face of the cost of living crisis.
‘The tax rises this April were never necessary or justified,’ he added. ‘Given the new pressures on energy prices and inflation, it’s even more important now to scrap these tax increases and focus on getting the economy growing again. Allowing people to keep more of their own money is always the best way.’
Lord Frost’s remarks pile the pressure on Chancellor Rishi Sunak and Mr Johnson to ditch the rise. For electoral victory, Frost has already urged the PM to restore his Government to traditional Conservative lines.
Britain’s Chancellor Of The Exchequer Rishi Unak and Britain’s Prime Minister Boris Johnson face pressure to scrap a tax increase.
Britain’s leading economic think-tank last night said delaying the national insurance hike to ease the cost of living crisis was affordable. The Institute for Fiscal Studies believes there is ‘headroom’ to hold off for at least a year without a major impact on plans to boost funding for health and social care.
According to business leaders, the September move will bring about a double blow for millions of homeowners.
Many firms will have to raise prices in order to compensate for higher NICs. This will result in families paying higher individual taxes, as well as more money at the shops.
Boris Johnson seemed to be open to delay in a TV interview, refusing to sign up eight times for the April project.
He merely said: ‘What I’m telling people is that if you want to fund our fantastic NHS, we have to pay for it. And this Government is determined to do so.’
Ministers are under increasing pressure to reconsider the rise. Campaigners and Conservative MPs warn that it will worsen the crisis of the cost of living facing millions.
Britain’s leading economic think-tank last night said delaying the national insurance hike to ease the cost of living crisis was affordable. The Institute for Fiscal Studies believes there is ‘headroom’ to hold off for at least a year without a major impact on plans to boost funding for health and social care (stock pic)
Paul Johnson, the head of the IFS, said last night: ‘There is certainly the fiscal room to say “Let’s not do it this year, let’s leave it until next year”.
‘If your concern is the cost of living issue this year, then economically delaying from this year for next isn’t going to have a major effect on what you’re trying to achieve, which is to pay for health and social care.
‘But my concern would be having announced it in September that if you delay it a year, is it really credible that you are going to do it next year? Add it all up, there will be a decline in living standards.
‘Clearly the national insurance hike doesn’t affect the people on the very lowest incomes, on benefits. Problem is, it affects those with low and moderate incomes. And they’re also suffering from inflation, and probably not getting wage rises in line with that.’ Since the Government announced the rise inflation has risen to its highest level in 30 years.
Experts have also predicted that interest rates would rise significantly and add hundreds of pounds to the mortgage repayments.
The national insurance hike will cost those on £30,000 around £255 over the course of a year, while someone earning £50,000 will lose around £505.
A survey by the Institute of Directors found that 4 out 10 businesses plan to raise their prices in order to cover higher national insurance costs.
Some others claimed they were forced to reduce staff or lower their wages in order to absorb the increased tax burden.
The national insurance hike will cost those on £30,000 around £255 over the course of a year, while someone earning £50,000 will lose around £505 (stock pic)
The IoD’s chief economist Kitty Ussher said the tax rise threatened the small and medium-sized businesses that are the ‘growth engine’ of the economy. She said: ‘Our data shows that the tax rise is itself inflationary at a time when prices are already rising fast.
‘Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans.’
David Davis, former Cabinet minister, demanded an overhaul yesterday. He said the rise would remove about 10 per cent of the disposable income of ‘ordinary families’ and fuel inflation. The Federation of Small Businesses warns that a national insurance increase of 1.25 percentage point could result in the loss of 50,000 jobs.
Its chairman Mike Cherry said: ‘Scrapping the hike would be a huge relief for business, at a time when good news is thin on the ground.
Family members will be subject to higher taxes on their own and more shopping expenses if April’s planned increase goes through.
‘The jobs tax hike will hit everyone, self-employed and employers alike. Once the rise is in effect, it will impact small businesses’ ability to grow and take on staff, and mean yet more inflationary pressure, as they are forced to pass on higher costs to customers.’
The Confederation of British Industry said: ‘Government must be wary of putting further pressure on businesses who will be central to the recovery, particularly by making it more expensive to recruit.’
Emma McClarkin of the British Beer and Pub Association said: ‘After a devastating winter for the sector and another setback in their recovery, the planned increase in national insurance from April adds yet another additional cost when the focus needs to be on providing pubs and brewers support to enable a strong and sustainable recovery.’
Don’t mention tax rises! How PM avoided it repeatedly
DANIEL MATIN and HARRIET LINDER FOR DAILY MAIL
Yesterday Boris Johnson appeared to be open to the possibility of delaying controversial national insurance increases.
Under intense pressure to reconsider, the Prime Minister repeatedly rejected to commit explicitly to the April increase.
The Daily Mail has joined forces with senior Tory MPs as well as business leaders to urge the Government to abandon the plan. A top minister who requested anonymity said that the entire Cabinet supported a delay.
The 1.25 percent increase in inflation could lead to a worsening of the cost-of-living crisis. Families will be subject to increases in energy bills, council taxes and inflation.
It will raise £12billion a year and was originally intended to help fund health and social care, but for the first three years most of the money will go towards clearing the post-Covid NHS backlog.
Yesterday, Mr Johnson was asked 8 times by Sky News to commit to the April rise.
But he refused to do so, instead saying only that the Government was ‘determined’ to ‘fund our fantastic NHS’.
He said: ‘What I’m telling you is we’ve got to put that money in, we’ve got to make that investment in our NHS.’
After being pressed for the eighth time, the PM added: ‘What I’m telling people is that if you want to fund our fantastic NHS, we have to pay for it. And this Government is determined to do so.’ His spokesman later insisted it was the ‘right approach’ to tackle a ‘long-standing problem’.
David Davis, a former Tory cabinet minister was the latest Conservative to call for a government rethink.
He told the BBC that raising national insurance would remove about 10 per cent of the disposable income of ordinary families and was based on the ‘wrong data’. He said it was ‘economically unwise’ because it created a ‘disincentive to work’, would penalise employers and would ‘hit the growth of the whole economy’ – making it unlikely to raise the £36billion forecast by the Treasury.
Mr Davis added: ‘They didn’t know… that by April we would have the highest inflation for 30 years. They didn’t know that interest rates would be going up, that council tax would be going up, that fuel prices were about to rise by about £700 a year for an average family. Therefore they didn’t know quite what pressure there would be on ordinary people.’
Opposition to the rise has been growing in recent weeks, with concerns that it will hit pay packets just as energy bills soar – and hamper small firms trying to recover from Covid disruption.
Last night Lib Dem leader Sir Ed Davey backed the Mail’s campaign, saying: ‘This unfair tax hike in the middle of a cost of living crisis is bad economics and a disaster for millions of people.’ Labour accused the PM and Chancellor Rishi Sunak of ‘whacking up business and working people’s taxes at the worst possible time’.