Don’t rule out national insurance U-turn amid Tory cost of living jitters | Tax and spending
Amid Boris Johnson’s recent travails, one Tory MP recounted how he, like many colleagues, was phoned by an ally of the prime minister seeking to shore up his support. Asked what changes No 10 should consider, the answer was immediate: scrap the planned national insurance rise and cut VAT on energy bills.
“Boris’s people have been ringing up a lot of us to hear what we they think, and as I understand it, every single MP is basically telling them to get a grip with taxes and the cost of living,” the MP said.
The VAT cut is among a series of measures on a long list of options being considered by the Treasury, although no decision is expected imminently, as everyone in government awaits Sue Gray’s report on Downing Street parties.
But amid the public chaos, another behind-the-scenes battle is being fought on the scheduled 1.25 percentage point increase in national insurance contributions, unveiled in September as a way to provide £12bn a year extra to reduce NHS waiting lists and, in the longer term, pay sustainably for social care.
While the move broke a Conservative manifesto pledge to not raise taxes, the rise was sold as necessary given the unprecedented pressures of Covid, and only five Tory MPs rebelled in a Commons vote.
But with inflation above 5%, and Tory MPs aware they have greater leverage with a prime minister battling for his political future, there is increasing speculation that a U-turn could happen.
Both Downing Street and the Treasury still reject the idea that they are considering such a change, with the latter in particular dismissing the mooted idea that Rishi Sunak, the chancellor, is now not keen on the plan.
“[Sunak, Sajid Javid, the health secretary] and the PM all stood up at a press conference and announced it together. It’s ludicrous that he’d disown it,” one source said.
“Some MPs are saying they want to delay it, but you can’t really say that without also saying when it should be delayed to, and where the money will come from for the NHS backlog and social care.”
No 10 sources are similarly adamant that nothing is being planned, while Johnson’s spokesman insisted on Monday that the PM is still fully behind what he termed the “right approach to tackle this long-standing problem”.
It was, however, notable that during a pooled TV clip during a visit to a hospital on Monday, Johnson seemed more keen to defend the basis for the plan than to confirm it will come into effect in April, as planned.
“What I’m telling people is that if you want to fund our fantastic NHS, we have to pay for it. And this government is determined to do so,” Johnson said, giving several variations of this sentiment – while declining eight invitations by the reporter to say the plan and timetable remained the same.
A series of government sources acknowledge that while No 10 remains publicly committed to the NI plan, Johnson is coming under intense pressure from his MPs, and also that when ministers and whips try to get backbenchers onside, all sorts of promises might be made.
Several cabinet ministers, including Kwasi Kwarteng, the business secretary, have publicly expressed doubt about the national insurance plan, while others, such as the education secretary Nadhim Zahawi, are seen as sympathetic to a delay should it happen.
All this is hardly like to put off a growing contingent of Tory backbenchers who hope for a change of heart on cost of living issues. Earlier this month, Johnson told the Commons he did not support a cut in VAT on fuel bills, and now it is being considered. It might be foolish to bet against national insurance going the same way.