George Osborne has warned Boris Johnson he will face a massive voter backlash over the national insurance hike as Tory MPs ramp up pressure for a rethink
George Osborne has warned Boris Johnson he will face a massive voter backlash over the national insurance hike as Tory MPs ramp up pressure for a rethink.
The former chancellor said the government was right to insist that the books must be balanced, but the £12billion raid is coming at a time when ‘incomes are shrinking’.
And while he praised the PM for his ‘big call’ on Omicron curbs he cautioned that his instincts on the tax increase – intended to fund the NHS and social care reforms – could be flawed.
‘One thing I learnt next door in No 11 is everyone says they’re happy to pay higher taxes for public services until the time comes to cough up,’ Mr Osborne wrote in the Spectator.
The intervention by the Tory big beast, who ran No11 for six years when David Cameron was in power, came as Tory MPs told Mr Johnson he might need to drop the NI hike to retain their support after Partygate.
The PM has been meeting wavering backbenchers in a bid to shore up support ahead of the publication of Sue Gray’s report into claims of lockdown breaches at No 10.
Sources say several have pressed him to delay the national insurance increase and ease the cost of living crisis facing millions of families.
The MPs are thought to want Mr Johnson to be ‘more Conservative’ – in return for backing him to lead them into the next election.
In his Spectator article, Mr Osborne said: ‘Rishi Sunak was right to insist last year that his neighbour’s penchant for extra spending had to be paid for, not borrowed through the deficit. But now the National Insurance rises loom at a time when real incomes are shrinking.’
He added: ‘To his real credit, Boris got the big call on Omicron right. On the economy, I’m less clear.’
Rishi Sunak (left) and Boris Johnson (right) are under pressure to rethink the NI hike
Fresh Cabinet tensions surfaced over the £12billion national insurance hike this week as Liz Truss insisted it will go ahead – despite claims Kwasi Kwarteng wants it dropped.
The Foreign Secretary said the ‘decision has been made’ on the increase – intended to fund the NHS and social care reforms – and ministers were ‘all behind that’.
The comments came amid renewed pressure for the Chancellor to think again to ease the cost of living crisis as inflation and energy bills soar.
Borrowing figures released yesterday showed Mr Sunak has some headroom, but he cautioned that interest payments on the government’s £2trillion debt mountain had hit a record high in December.
Meanwhile, Health Secretary Sajid Javid said the funding for the NHS catch-up after Covid and social care were ‘secure’.
In a round of interviews this morning, Ms Truss said: ‘Cabinet has made the decision to proceed with the National Insurance increase and we’re all behind that, and there are no plans to change that.’
Asked on Sky News if it was something that would be reconsidered, she said: ‘No.’
She later told LBC: ‘The decision has been made on National Insurance, that was a collective decision and it’s going ahead.’
The British Chambers of Commerce and the Institute of Directors both yesterday called for the NI increase to be scrapped.
They have been inundated with calls from members concerned that the 1.25 percentage point rise in national insurance contributions would damage the economy and stop firms taking on staff.
The Government borrowed £16.8billion last month – roughly in line with forecasts but some £7.6billion less than in December 2021
Supposed to help fund health and social care, the £12billion tax grab takes effect from April.
However, there are concerns that most of the money will be spent on the NHS treatment backlog and that it will come in just as families face rocketing energy and council tax bills.
Earlier this week the Mail revealed that Lord Frost, the PM’s former Brexit chief, had added his support to calls for the hike to be scrapped.
Some Cabinet ministers have insisted that the rise will still go ahead even though the PM appeared to leave the door ajar for a rethink in a television interview.
Official figures this week suggested the Government now had ‘headroom’ to cancel the tax increase after borrowing around £13billion less than expected.
It was claimed that the PM was ‘receptive’ to pleas from MPs and had left them believing he would embark on a ‘massive gear shift’ to tackle the cost of living crisis.
Commons leader Jacob Rees-Mogg cast doubt over Cabinet support for the policy last night, telling the BBC: ‘I am very pleased you are talking about the cost of living – that is where the Government needs to be putting its energy … but taxation is a matter for the Chancellor.’
Since the national insurance increase was announced in September energy prices have rocketed and inflation has risen to its highest level in three decades.
On top of that, many experts predict that interest rates will rise significantly in the coming months – adding hundreds of pounds to mortgage repayments. The tax grab will cost someone on a £30,000 salary around £255 a year and £505 for those on £50,000. But it also costs businesses because employers have to pay the levy on wages.
Kitty Ussher of the IoD said: ‘This will make the cost of living crisis worse by reducing take-home pay. It’s a tax on jobs, causing businesses to employ less people. It will hurt companies the hardest that have suffered most recently like leisure and hospitality.
‘Businesses will have to pay regardless of whether they are profitable, increasing their costs and pushing up the prices they charge, making inflation even worse. We want to see this tax rise scrapped.
‘Frankly, there’s enough for business leaders to be worrying about in the wider economy at the moment without adding this into the mix.’
The BCC’s Shevaun Haviland said: ‘Our members are telling us they are being squeezed by rising wages due to fierce competition for staff, and that the incoming NI increase will compound this at the worst possible time. If this tax increase is not postponed, we will see a stranglehold put on the economic recovery just when it needs to be powering up. Firms need to be given a chance to come up for air.’
Quizzed on the issue, Mr Johnson’s spokesman replied: ‘We need to responsibly fund how we tackle the backlog and how we deal with the challenge of social care.’