Boris and Rishi at war as Chancellor ‘plays hardball’ on £10bn care tax

Tense stand-off as Westminster abuzz with rumours over reshuff le this week

CHANCELLOR Rishi Sunak was last night ‘playing hardball’ over Boris Johnson’s proposed care tax as tense negotiations over new money for the NHS went down to the wire.

Downing Street had been hoping to secure agreement with the Treasury over the new NHS and Social Care Levy by early yesterday and to announce the details on Tuesday.

But amid mounting tensions between No10 and No11, by early evening Mr Sunak was still demanding assurances from the Prime Minister that, once introduced, the £10 billion-a-year levy would cover the cost of dealing with the NHS’s Covid backlog – and that he would not be forced to keep finding top-up funds from depleted Treasury coffers.

The row has come amid growing Westminster rumours that Mr Johnson could reshuffle his Cabinet as early as Thursday, as part of a plan to ‘relaunch’ his Government for the autumn.

The rumours started after some advisers were told to ‘block out their diaries’ for the end of the week, with Foreign Secretary Dominic Raab and Education Secretary Gavin Williamson favourites to be moved.

Despite the tensions with Mr Johnson, Mr Sunak is presumed to be safe in his role because his popularity within the party would make him too great a threat to Mr Johnson if he were stripped of the job.

No 10 and No 11 were also negotiating yesterday a separate, multi-billion-pound boost for the NHS this winter to cover the period until the proposed levy comes into effect in April. The strain placed on the NHS by the pandemic – more than 500,000 Covid patients have been admitted since March last year – has pushed the waiting list for elective surgery and routine treatment in England to a record high of 5.3million.

This figure is predicted to rise to 13 million by the next Election if no action is taken.

The Chancellor’s stance came amid a growing revolt in the Cabinet and on the backbenches over the levy, which would breach the party’s manifesto promise at the last Election not to raise taxes.

At least six Ministers, including the Chancellor, have expressed concerns about the breaking of the promise and the potential damage to the party’s reputation for economic prudence.

The Prime Minister has said he is determined to fulfil the pledge he made when he entered No10 to ‘fix’ long-term care for the elderly. After deploying Health Secretary Sajid Javid to put pressure on Mr Sunak to agree to a dedicated levy, arguments continued across the summer over what form it should take – a 2 per cent rise on the National Insurance paid by employees or 1 per cent on that paid by employers and employees.

Both options would raise about £10billion a year.

Mr Sunak has also been pushing for a cap of around £80,000 on the maximum amount which people have to pay towards care. The money raised would be split between reducing the backlog of operations and reforming long-term care.

A source said: ‘The Chancellor did not want to do this. He doesn’t think we should be increasing taxes when people are struggling to get back on their feet, and particularly not when we said we wouldn’t.

‘So he has made sure he has played hardball over how the money is spent. After it comes into effect in April, it will have to cover a lot of the cost of sorting out the NHS. He is not going to just hand over endless amounts of money.’

A Conservative MP said a ‘Battle Royale’ was going on over how the final plans will look, adding: ‘Do we want to be hiking up taxes to preserve the assets of people who are much better off?’ Another said: ‘There are broadly two concerns. First, is [a rise in] National Insurance the right thing to do, as it’s a tax on jobs? It also has the generational unfairness aspect of taxing young people.

‘Secondly, there is a broader question of whether it is right for a Conservative government to be increasing income taxes. What is the philosophical underpinning of this Government?’

Former Cabinet Minister David Davis said: ‘I will only vote for an increase in National Insurance contributions if there is a proper worked out plan to go with it. [The money] would have to be hypothecated. You’ve got to tie down where it will go. Simply raising National Insurance isn’t enough.’

Mr Sunak is expected to attend a reception for the 1922 Committee of Tory backbenchers tomorrow, where the tax hike will be high on the agenda.

In an attempt to fend off accusations of generational unfairness, the Government is also expected to announce suspending the pensions triple lock on the same day as the National Insurance announcement.

The commitment guarantees the state pension will rise in line with inflation, earnings or 2.5 per cent, whichever is higher. Distortions to wages following the Covid crisis could mean a rise of as much as 8 per cent for pensioners next year, unless the triple lock is amended.

A senior Government source said: ‘This Government will not duck the tough but necessary decisions needed to get the NHS back on its feet.’

‘Sunak is not going to just hand over money’