The whole Cabinet would back delaying the controversial national insurance hike to help families hit by the cost of living crisis, a top minister claims.
Boris Johnson 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.
A string of senior Tory MPs, business leaders and economists have joined the Daily Mail in calling on the Government to delay or scrap Chancellor Rishi Sunak’s plan.
Last night a senior minister said there would be ‘no objection’ from the Cabinet if Mr Sunak halted the increase.
They added: ‘If the Chancellor proposed to the Cabinet that he wanted to cancel the national insurance contributions rise, there would be no objection to it.
‘There would be no objection from the Prime Minister either because this is very much a Treasury policy.’
The Cabinet minister added: ‘It is the wrong time to be raising taxes. We need to have a clear recovery from Covid before we start working out what we want to do about the fiscal balance. The ball is very firmly in the Chancellor’s court.’
The national insurance increase, which was announced last autumn, will raise £12billion to £13billion a year for the Treasury.
It was intended to help fund health and social care, but most of the money for the first three years will go toward clearing the post-Covid NHS backlog.
Deputy Prime Minister Dominic Raab appeared to distance himself from the policy yesterday but reluctantly said it should come into force this April.
He told Times Radio: ‘I would much rather that we didn’t have to do it.
‘But given the pandemic and the walloping of the public finances, we do. And what I do not want to do… is duck, as successive governments and prime ministers have, the issue of social care.
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. Even those who kept their jobs last year saw their incomes reduced under furlough.
These are anxious times, and the repercussions will continue for months, if not years, to come. Is this really the time to hit people with yet another rise?
An NI hike will leave employees hundreds of pounds out of pocket, with some families facing painful choices: food or heating, new shoes for the children or fix the car? The last thing they, or the economy, needs is another financial blow.
I understand that the Government will need to find the money to cover the booming cost of running the NHS, and the social care funding problem also needs to be addressed. But these issues have confronted us for decades and will take years to resolve.
With the economy in such a fragile state, now is not the time to solve them with what amounts to a tax on jobs. It is morally wrong and makes no economic sense.
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.
And you don’t have to take my word for it. 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.