Last night, MPs and business leaders argued that the April increase in national insurance must stop to ensure families can survive an economic crisis.
Amid mounting concern over soaring bills, they have joined the Mail to warn ministers that they must delay and rethink the increase – or risk piling unsustainable pressure on struggling households.
Senior Conservative MPs said the 1.25 percentage point rise was ‘too much’ and would make families poorer just as the nation was hoping for a post-Covid economic upswing.
The £12billion tax grab is due to take effect from April when families face a huge hike in energy bills and a rise in council tax.
According to MPs last night, business leaders and others, the increase in national insurable costs in April should be stopped. This will help families cope with a rising cost of living. Pictured: – The Chancellor visits Stoke-on-Trent on Thursday
Inflation is already at its highest level in 30 years and many experts expect interest rates to rise significantly – adding hundreds of pounds to mortgage repayments.
The national insurance rise will cost a worker on a £30,000 salary around £255 over a year – and £505 for anyone earning £50,000.
The increase, which was announced last year, will raise around £12-13billion annually. Although originally meant 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.
Opposition to the increase has grown in both business and politics. Many MPs worry that it could impact pay packets, just as energy bills will soar up to 50%. This will affect small businesses trying to rebound from pandemic disruption.
At least one Cabinet minister is said to have urged Boris Johnson to abandon the move, while the PM’s former Brexit chief David Frost has warned that the Tories risk losing the next election unless they cut taxes.
Former Tory minister Sir John Redwood said: ‘They need to scrap the NI rise now. This is an obvious breach of a key manifesto promise and a tax for work. This will only make the crisis of cost-of-living worse.
‘It will also slow the economy too much. These policies are wrong and they must be changed immediately. We want people to become more prosperous, not the opposite.’
Craig Mackinlay, of the Net Zero Scrutiny Group of Tory MPs, said: ‘With the pressures on cost of living, potential interest rate rises, undoubted massive increases in fuel bills and other inflationary costs, now is not the time to implement a 1.25 per cent national insurance rise. It must now be delayed or rethought entirely.’
Conservative former minister David Jones warned that the hike – coupled with rising energy prices and council tax – would put ‘far too much pressure on families’.
He added: ‘Energy prices are international – there is little or nothing the Government can do to control them. But what is entirely within the Government’s own control is the tax system.
‘And given the exceptional circumstances, the Government should at least be announcing that the NI increases will not take place. They should at the very least postpone them for a year.’
Mike Cherry, national chairman of the Federation of Small Businesses, said: ‘National insurance hikes will lead to lower wages and make the cost of living crisis far worse.
‘Scrapping the tax rise would help secure the recovery and boost pay packets, helping under-pressure household budgets. We urge the Government to take stock of the significant inflationary pressures and change course.’
At least one Cabinet minister is said to have urged Boris Johnson (pictured on Tuesday) to abandon the move, while the PM’s former Brexit chief David Frost has warned that the Tories risk losing the next election unless they cut taxes
Julian Jessop, economics fellow at the Institute of Economic Affairs, said raising taxes now could be ‘the final straw that tips the economy back into recession’.
Boris Johnson, Chancellor Rishi Sonak and others are currently working together to reduce the effects of the rise in energy bills. However, the Mail has learned that no decision will be made for several weeks.
Yesterday’s Business Secretary Kwasi Kwarteng stated that bill payers will have to wait until March’s spring statement to learn if extra assistance is possible.
A string of ideas has been suggested, such as imposing a stabilisation mechanism on energy prices, extending the warm homes discount or even giving every family a one-off £500 payment to help with domestic bills.
Adam Scorer, chief executive of National Energy Action, a fuel poverty charity, said: ‘Halting the NI rise is one way to limit the damage, but it’s absolutely essential that the Government takes direct action to reduce energy costs for families on low incomes.
‘Without that we’ll see millions simply unable to afford a warm home.’
Boris Johnson, Chancellor Rishi Sonak and others are currently working together to reduce the effects of the rise in energy bills. However, the Mail has learned that no decision will be made for several weeks.
A Government source said last night: ‘This NHS and social care levy is to ensure the NHS gets the funding it needs to clear the backlogs caused by the pandemic and to instigate long-term social care reform.’
A Downing Street spokesman added: ‘We’ve taken decisive and historic action with our health and social care levy due to raise around £13billion a year for the NHS and social care.
‘This will benefit people up and down the country, including by tackling the backlog that the pandemic has created on NHS operations and procedures, strengthening the adult social care system so that people do not have to bear the financial risks of catastrophic care costs themselves, and funding a 3 per cent pay rise for nurses.’