Treasury concern over fears of No 10 U-turn on National Insurance hike | National insurance


The Treasury is growing increasingly alarmed that Boris Johnson is preparing to scrap the National Insurance hike in a desperate bid to appease right-wing Tory MPs as he fights to save his job.

The Guardian understands that Rishi Sunak has privately stressed to MPs that the tax hike must go as planned – with a frontbencher who has met him in recent days speculating that the Chancellor’s position could become untenable if Johnson seeks to overthrow him.

Treasury aides say the beleaguered Prime Minister has yet to raise the possibility of canceling or delaying the £12billion tax hike, with Johnson saying ‘there has been no discussion at any level”.

Yet speaking in Wales on Thursday, the Prime Minister again refused to commit to continuing the 1.25 percentage point rise in National Insurance (NIC) contributions, which will be branded as a ‘tax health and social protection”.

Johnson said it was “absolutely vital” to find the money, saying: “We have to fund the backlog of Covid, we have to fix social care. Every penny will go towards that end. But when asked to to explicitly confirm that the increase would continue as planned, he declined to do so.

A person with knowledge of No 10’s thinking said there were no firm plans yet to change course on NICs – but predicted Johnson would if he faced a vote of no confidence.

They said: “He’s shown enough leg now that people stick with him on the right. Whether he actually does or not will depend on whether he thinks he has to do it to win the vote.

Kwasi Kwarteng told the BBC on Thursday that there would be “no U-turn” on the upside.

The Business Secretary said: ‘We are totally committed to funding the NHS, eliminating the NHS backlog, as well as funding social care and the way to do that is through this tax hike.

Health bosses have urged Johnson to ensure resources get to the NHS. “Without this additional funding, the public will have to wait longer for treatment and hundreds of thousands of vulnerable people will not get the care and support they need from social services,” said Matthew Taylor, director General of the NHS Confederation. “But it’s up to the government to decide how best to finance this additional investment.”

Lord Crisp, former chief executive of the NHS in England, said that “it is vital that the government…continues its commitment to the NHS and social care”. Johnson owes NHS staff to keep their promise in recognition of their hard work during the pandemic, he added. “All those warm words they’ve heard from politicians need to be followed by hard cash – not broken promises,” Crisp said.

However, Mel Stride, the Conservative chairman of the Treasury Select Committee, added his voice to those calling for the rise of NICs to be postponed, saying “the stars have aligned” in favor of a postponement.

But Treasury sources played down the idea that higher-than-expected tax receipts provided Sunak with a windfall, which he could use to reverse or at least delay the increase. With rising interest rates, they instead point to the rising cost of financing government borrowing.

The Prime Minister is under concerted pressure from right-wing Tories, including former Europe minister David Frost and House of Commons leader Jacob Rees-Mogg, to reverse the tax hike, which was set by law in the fall.

A government source said: ‘At the end of the day it’s obviously a decision for the prime minister.

Johnson needs the support of backbenchers to stave off the threat of a leadership challenge in the coming days.

As well as reversing the tax hike, others demanded that he water down the government’s net zero policies.

Ryan Shorthouse, chief executive of the Conservative think tank Bright Blue, has called on the government to widen the base of the health and social care tax – including rental income and pensions, for example – so that it can be set at a lower rate.

But he warned of the risk of the Prime Minister making decisions in the heat of the current leadership crisis. “He’s weakened: he’s now completely indebted to a lot of his backbench MPs and what they’re calling for,” he said.

Meanwhile, Whitehall is frustrated that plans to tackle the cost-of-living crisis appear to have stalled, as the prime minister focuses on safeguarding his premiership.

A government source has suggested a planned meeting between Johnson and Sunak on the issue was canceled this week, as the prime minister held a series of meetings with wavering colleagues in a bid to dissuade them from demanding a vote of distrust of his leadership.

A spokesperson for Johnson denied the meeting had been cancelled, saying: “Certainly not. They meet weekly.

But officials across Whitehall report decisions requiring No 10’s approval are stalled.

Sunak ripped off the pledge to Johnson’s raise as quid pro quo for the Prime Minister’s costly plan to tackle NHS waiting lists and cap lifetime social care costs.

MPs who have seen the chancellor in recent days say he has been adamant about the need for the climb to take place in time in April. One MP said it was clear the only person who could go a different route would be the prime minister.

Sunak has imposed a number of spending cuts in recent months, including scrapping the UK’s aid target of 0.7% of national income and reversing the £20 increase universal credit per week.

Widely seen as a potential successor to the Prime Minister, the Chancellor has been less enthusiastic in his public support for Johnson than his leadership rival, Liz Truss.

Johnson was in Wales on Thursday as his entourage continued to await senior civil servant Sue Gray’s investigation into the alleged lockdown parties in Downing Street.

When it is published – now expected on Monday – a group of Tory MPs are expected to submit letters to 1922 backbench committee chairman Graham Brady calling for a vote of no confidence.

If Johnson lost such a vote, which could take place within days, his term as prime minister would be over.


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