PM under pressure to scrap rise in National Insurance

BORIS JOHNSON is under pressure to postpone or cancel the planned National Insurance rise, with a leading economic think tank and one of the Prime Minister’s former Cabinet ministers joining calls for an about-turn.

Prof Jagjit Chadha, Director of the National Institute of Economic and Social Research (NIESR), said that reversing the increase scheduled for April would be “absolutely possible” and “makes a lot of sense”. Separately, writing in The Sunday Telegraph, Robert Jenrick, who was part of the Cabinet that signed off on the rise last year, declares that postponing the rise would show that “the Government’s conservative instincts remain”.

It would be “the quickest way to alleviate the pressures on household budgets” and “prioritise the rebound of the economy”, adds Mr Jenrick, who was housing secretary until September.

The interventions significantly increase the pressure on Mr Johnson to halt the rise, which will be introduced in the form of a new health and social care levy. Privately, many MPs have demanded such a move in conversations with No 10 and party whips as the Prime Minister’s supporters canvas backbenchers for a “shopping list” of policy changes that could shore up Mr Johnson’s position.

One government source admitted that delaying or cancelling the rise appeared to be one of the most popular demands by backbenchers, second only to the lifting of Covid-19 restrictions.

In an interview with GB News, to be broadcast this week, Prof Chadha said: “Higher National Insurance contributions (NICs) are essentially an attack on jobs, particularly for the lower paid, those hit most by this Covid crisis.

“To the extent there has been some positive news on the government’s finances, it would be absolutely possible not to raise NICs.”

Shelving the NIC increases “would help the economy to grow, injecting

some demand”, added Prof Chadha. “Given the cost-of-living squeeze, that would make a lot of sense.”

Amid growing concern about a costof-living crisis, Mr Johnson is being urged to overrule the Treasury and scrap a planned £12 billion tax rise, announced by Rishi Sunak last year and scheduled for April.

Today Mr Jenrick states: “At a time when the public are feeling the pinch, the tax burden is at its highest since the 1950s.

“The Treasury now faces an unenviable decision about whether to proceed with the NI hike planned for April.

“The quickest way to alleviate pressures on household budgets would be to postpone the hike.

“That seems sensible now. NI penalises work by disincentivising taking on more hours and getting promoted.

“It would also show the Government’s Conservative instincts remain.

“None of these solutions are without their drawbacks, but policymaking is often about taking the least bad option.

“To avoid the worst outcome for families this coming year, we need a new approach to monetary, energy and tax policy and hard realities must be confronted,” Mr Jenrick says.

On Thursday, Rachel Reeves, the shadow chancellor, described the Conservatives as “a high-tax, low-growth party”, pointing to an incoming “triple whammy” of higher NICs, increased council tax and a freeze on income tax thresholds.

“Now is the wrong time to raise taxes on ordinary working people,” Ms Reeves said.

Earlier this month, Jacob Rees-Mogg, the Leader of the Commons, privately added his voice to calls from Tory MPs for the Government to shelve the 1.25 percentage point rise in NICS – paid by employers and employees.

Under the planned increase, those earning more than £67,100 will pay an additional £715 more a year, while basic rate taxpayers earning £24,100 will contribute an extra £180.

Mr Sunak has pushed back strongly against any suggestion that the rise should be postponed or scrapped.

“You can’t conjure money out of thin air,” said one Treasury source.

A government source added: “The NHS and social care levy will be brought in to ensure the NHS gets the funding it needs this year to clear the waiting lists caused by the pandemic.

“Beyond that it will pay for the Prime Minister’s long-term social care reform plan.

“The alternative is cutting large sums of spending elsewhere.”