Boris Johnson repeatedly declined on Monday to say whether the 12 billion-pound increase in national insurance would continue, as planned in April, as he was pressured by his own party to postpone it.
Conservative right-wingers and some ministers have called on the UK prime minister, who is fighting for his political life over the Downing Street scandal, to postpone tax increases to ease the cost-of-living crisis.
Chancellor Rishi Sunak argues that tax increases must continue to fund ongoing reforms in the NHS and welfare. Downing Street also insisted on Monday that the 1.25 percentage point increase in national insurance rates – paid by employees and employers – would continue as planned.
But Johnson seemed more cautious. Asked eight times in a television interview whether this would continue in April, he avoided the question. “Listen to what I’m saying – we need to invest this money, this investment in our NHS,” he replied.
The Chancellor and Johnson are trying to finalize a package of measures to tackle the decline in household incomes in April, when the planned rise in NI coincides with a 50% jump in energy bills when setting a price cap that covers most of the households to increase from £ 1,277 to £ 2,000 per household per year.
According to people familiar with the discussions, Sunak has compiled a “long list” of options, but Johnson has been too distracted by his struggle for political survival to focus on the issue.
The goal is to draw up a plan by the end of next week and certainly before February 7, when Ofgem announces the new energy limit. The ceiling is set twice a year by the energy regulator.
The plan is expected to include targeted assistance to vulnerable households, possibly through an extended rebate scheme for warm homes, accompanied by a “universal” plan to help all homes.
Downing Street does not rule out reducing the 5 percent VAT rate to zero, but ministers are also considering a mechanism to allocate the cost of this year’s energy jump over several years.
The increase in national security is linked to tensions over Tory leadership, with Johnson urged to reduce the tax burden, which is heading to its highest level in 70 years.
Jacob Rees-Mogg, leader of the House of Commons, called for the tax to be suspended this month, while critics of Johnson’s right-wing party spoke on Monday.
David Davis, a former Brexit secretary who called on Johnson to leave last week, said the tax increase would hit “those people who voted for us to avoid a Jeremy Corbyn tax increase.”
Meanwhile, former Finance Minister Robert Jenrick told the FT that postponing the increase would ease pressure on household incomes. He said the NI “punishes those who take more hours or get promoted.”
During months of intense negotiations last year, Sunak insisted that if Johnson wanted to spend more on the NHS and welfare, he would have to pay for it through higher taxes, not more loans.
Sunak’s aides said reports that the chancellor was now calling the rise of NI a “prime minister’s tax” in private meetings with Tory MPs were rubbish. A cabinet minister said it was “the chancellor’s idea”.
One of Sunak’s allies said, “You can’t borrow these things. There is no discussion, we are involved in any delay. “