Boris Johnson refuses to guarantee national insurance hike will go ahead

Business warns £12bn tax hike will drive up prices in shops

Andrew Woodcock
Political Editor
Monday 24 January 2022 16:50
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Boris Johnson refuses to guarantee National Insurance rise will go ahead

Boris Johnson today refused to guarantee that the government’s planned national insurance hike would go ahead in April, fuelling speculation that he might cave in to pressure from his own MPs to ditch the tax rise.

The prime minister’s official spokesperson told reporters that Mr Johnson and his cabinet remain committed to the increase of 1.25 per cent in contributions from both employees and employers.

But asked eight times during a TV interview whether he could confirm that the NI rise would take place as planned, the PM repeatedly dodged the question, saying only that the government needs to raise money to fund the NHS.

Mr Johnson’s comments came as business warned that the so-called health and social care levy would force up prices and cost jobs, as companies would be unable to absorb the additional £12bn annual cost.

And they followed claims from an unnamed minister who told the Daily Mail that the entire cabinet would support scrapping the hike, which will cost the average worker £255 a year.

Former minister David Davis today became the latest prominent Tory to speak out against the rise – which breaches a 2019 Conservative manifesto commitment.

He argued it would be “economically unwise” because it would create a disincentive to work, would penalise employers, and would “hit the growth of the whole economy”.

Leader of the Commons Jacob Rees-Mogg is also understood to have voiced his opposition in cabinet.

But the PM’s spokesperson today insisted that Mr Johnson remained committed to the plan, adding: “Cabinet took a collective decision to take this action, to put money into our NHS, to tackle the backlogs, to resolve the long-standing problem of social care and to fund a pay rise for nurses. The cabinet stands behind that decision.”

Mr Johnson was decidedly more equivocal on the issue when asked repeatedly during a hospital visit to guarantee that the levy would go ahead.

Asked about his plans for national insurance, the PM said he wanted to “look at all the ways we can to address the cost of living”.

And he added: “What I’m telling people is that if we want to fund our fantastic NHS we have to pay for it, and this government is determined to do so.”

The results of a survey by the Institute of Directors (IoD) revealed today that almost four in 10 businesses (38 per cent) expect to raise prices to offset some or all of the cost of the additional employers’ contributions.

Around one in five (19 per cent) said they would “employ fewer people”, while 15 per cent said they would cut investment.

IoD chief economist Kitty Ussher said: “The forthcoming rise in employers’ national insurance contributions is of real and genuine concern to business leaders, particularly those running small and medium-sized businesses that are the growth engine of our economy.

“Our data shows that the tax rise is itself inflationary at a time when prices are already rising fast.

“Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans.”

The PM’s official spokesperson said: “This levy is first and foremost to deal with tackling the massive backlog which we have seen caused by this global pandemic.

“It then seeks to address the long-standing problem of fixing our social care system, which unfairly penalises a small minority, and of course it also helps fund a pay rise for NHS staff, which the public massively want to see.

“So this is the right approach to tackle this long-standing problem.”

And education secretary Nadhim Zahawi said the country would not be “doing ourselves any favours” by delaying the rise.

Mr Zahawi said the impact of the policy would be reviewed, but insisted it remains the “right thing to do” in order to solve the social care crisis and reduce the NHS backlog caused by the coronavirus pandemic.

Speaking to BBC Radio 4’s Today programme, Mr Zahawi said: “It is really important to remember that the highest earners … are paying half of that contribution, and 6.1 million of the lowest earners pay nothing.

“So it is as progressive as we can make it to deal with a problem that breaks many an individual in their old age.”

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