Cabinet split on National Insurance rise as Kwarteng ‘voices concern to Sunak’

Business secretary fears impact of tax hike on incomes

Liam James
Wednesday 26 January 2022 00:35
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Boris Johnson refuses to guarantee National Insurance rise will go ahead

A fresh Cabinet split over the planned rise to National Insurance is reported to have emerged with Rishi Sunak being warned the measure would hit living standards.

National Insurance contributions are set to rise by 2.5 percentage points in April, split between employers and workers. The Treasury expects the move to bring in £12bn a year to fund health and social care.

Mr Sunak faces mounting pressure from critics to drop, or at least delay, the rise as new figures showed that the government has been borrowing billions less than expected.

The Cabinet backed the tax rise in September when it was voted through parliament but signs of division have emerged in recent weeks as fears of an upcoming cost of living crisis set in.

Kwasi Kwarteng, the business secretary, is reportedly the latest of the chancellor's Cabinet colleagues to oppose the increase.

The Telegraph cites allies of the business secretary as saying that he privately voiced concerns with Mr Sunak over the move.

Mr Kwarteng was said to be concerned that it would hit living standards by squeezing incomes. He also thinks it would deter employers from hiring as the cost of each staff member would be higher.

The chancellor has indicated that he wishes to go ahead with the rise but Boris Johnson was evasive when asked about it on Monday.

The prime minister said “we have to pay for” NHS improvements but would not confirm if the National Insurance hike would go ahead when asked directly several times.

The planned increase will come after inflation rose to more than double the UK’s 2 per cent target and households are set to suffer another blow as the energy price cap is expected to be raised.

The combined cost of rising bills and taxes is estimated to be an average of £600 per household.

Earlier this month, Jacob Rees Mogg, leader of the House of Commons, asked the chancellor to abandon the plan, saying it could not be justified amid rising inflation and uncertainty over energy prices.

Tory backbenchers have also opposed the tax, with former Brexit secretary David Davis saying on Monday that it was based on the “wrong data”.

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