Boris Johnson faces open warfare with his own party over national insurance hike

Ex-chancellor Philip Hammond joins chorus of condemnation for £10bn tax rise for social care

Andrew Woodcock
Political Editor
Sunday 05 September 2021 22:43
<p>The PM and the chancellor are expected to unveil the plan this week </p>

The PM and the chancellor are expected to unveil the plan this week

Boris Johnson is facing open warfare with members of his own party over plans to hike national insurance contributions (NI) of 25 million of workers to raise £10bn for social care for the elderly.

Former chancellor Philip Hammond on Sunday became the latest senior Tory to denounce the plan, warning it will provoke “a very significant backlash” causing serious damage to the Conservative Party.

Ex-prime minister Sir John Major has blasted the use of NI to pay for care as “regressive”, while former party leader Sir Iain Duncan Smith warned that Mr Johnson’s plans could turn the Tories into a “high-tax, high-spend party” without resolving the long-standing shortage of funds for care.

And cabinet minister Jacob Rees-Mogg sent a thinly-veiled warning to the PM about the danger of breaching his 2019 manifesto promise not to raise NI, income tax or VAT during this parliament.

Writing in the Sunday Express, the leader of the Commons recalled George Bush Sr’s broken “read my lips” promise not to raise taxes, adding: “Voters remembered these words after President Bush had forgotten them.”

Mr Rees-Mogg and trade secretary Liz Truss are believed to be among a number of cabinet ministers hostile to NI rises of 1 per cent or more expected to be announced this week alongside a new funding settlement to help the NHS with the estimated £10bn-a-year bill for dealing with the aftermath of the Covid crisis.

The row came as shadow cabinet minister Lisa Nandy indicated Labour was ready to consider a tax on wealth to help pay for social care, and the TUC called for a £17bn hike to capital gains tax to fill the funding gap.

Backing the “broad principle” that those with most should bear the greatest burden, Ms Nandy said this could mean that “those who make their money out of something other than income – out of assets – pay a bit more”.

Mr Johnson, Rishi Sunak and Sajid Javid were finalising details of the plan ahead of its expected launch in the coming week, and the chancellor will face the wrath of Tory MPs at a meeting of the backbench 1922 Committee on Monday evening.

“Many dozens” of Conservative MPs have voiced concern in WhatsApp groups about the prospect of asking low-paid workers – many of whom cannot afford to buy their own homes – to pay more tax in order to ensure that elderly homeowners are able to pass on their property to their children when they die.

One anonymous cabinet minister told the Sunday Telegraph: “Putting up national insurance would be morally, economically and politically wrong. After all that’s happened in the last 18 months they can’t seriously be thinking about a tax raid on supermarket workers and nurses so the children of Surrey homeowners can receive bigger inheritances.”

And influential backbencher Steve Baker said: “Of all the ways to break manifesto tax pledges to fund the NHS and social care, raising NI must be the worst. In this time of crisis, we need a zero-based review of what the state does and how it is funded.”

Lord Hammond said that he would not vote for the NI rise if the proposal came to the House of Lords.

“An increase in NICs is asking young working people, some of whom will never inherit property, to subsidise older people who’ve accumulated wealth during their lifetime and have a property,” the former chancellor told Times Radio.

“On any basis, that has got to be wrong. I think that would provoke a very significant backlash. I think it would cause the government – the Conservative Party– significant damage. I also think it’s the wrong thing to do. It’s not just about party political advantage. Economically, politically, expanding the state further in order to protect private assets by asking poor people to subsidise rich people has got to be the wrong thing to do.”

Lord Hammond also raised concern about plans being discussed in government to break another manifesto promise by ditching the pensions triple lock in order to avoid an 8 per cent increase resulting from unusual pay trends during the pandemic.

Mr Sunak should instead announce a one-off adjustment to the lock – which guarantees a rise in line with the highest of pay, prices or 2.5 per cent – to “smooth” the inflation-busting rise over two years, before restoring the pledge for the future, he said.

National insurance is paid by workers earning as little as £9,500 a year, compared to income tax which does not kick in until £12,570.

Lower-income workers pay the 12 per cent rate on all their eligible salary while the better-off pay just 2 per cent on earnings over around £50,000. Pensioners, who would stand to benefit most from the social care plan, do not pay NI, which are also not levied on unearned income such as rents and dividends.

The chief executive of the NHS Confederation, Matthew Taylor, said that the health service needed additional support as it was already “running on hot” in summer, a time of year when pressures are normally reduced.

The confederation last week joined NHS Providers in calling for a £10bn budget boost to tackle the backlog of more than 5 million patients waiting for treatment which has built up as a result of Covid.

“It’s incredibly important to get some clarity from the government about the funding for the rest of this year, that we sustain that funding, and that we have the funding that we need on the assumption that the pressures of Covid are going to continue,” Mr Taylor told Sky.

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