Finance

Boris Johnson under pressure from Tory MPs to postpone national insurance rise

Boris Johnson faced new calls from his own MPs to postpone a planned £12bn national insurance rise in April, as pressure mounted on him to tack to the right to save his premiership.

Johnson, who has been holding a series of meetings with Tory MPs to try to shore up his position in the wake of the “Partygate” scandal, is being urged to chart a new course with lower taxes, less regulation and watered-down environmental commitments.

On Thursday Mel Stride, Tory chair of the Commons Treasury committee, became the latest senior figure in the party to urge Johnson to postpone the 1.25 percentage point national insurance increase.

Stride argued that, since UK public borrowing was £13bn lower than official forecasts in the financial year to December, this would create “headroom” to delay the tax rise for a year.

“Given the cost of living pressures, I think now would be the time to put that headroom to good use,” Stride told the Financial Times.

Downing Street said there were “no plans” to delay the tax increase, but refused to say categorically that it would go ahead in April.

Johnson, on a visit to Wales, appeared to defend the plan. “Every penny will go towards fixing the Covid backlogs and also social care,” he said, adding: “It does need to be sorted out.”

But although the prime minister is publicly defending the increase, there will be a political temptation to delay it — winning some credit with his low tax-supporting critics in the Conservative party — as he tries to contain a rebellion.

The Treasury is fiercely resisting any delay to the national insurance rise, arguing that the public finances are extremely fragile and that the extra tax revenues are needed to fund permanent extra spending on health and social care.

Paul Johnson, director of the Institute for Fiscal Studies, said: “This is where the economics, which are very much about the medium run, fall foul of the politics, which are very much in the short run.”

He said that, while the public finances could withstand a one-year delay in the introduction of the £12bn tax rise, the money was needed in the medium term. “Having announced the rise for 2022, how credible will it be to announce a delay until 2023, when you are one year closer to the election?” he asked.

Treasury insiders fear any delay would amount to an effective abandonment of the plan at a time when the cost of servicing Britain’s public debt is rising because of higher interest and inflation rates.

Rishi Sunak, the chancellor, argued forcibly last year that the extra health and social care spending had to be covered by higher taxes and that increasing borrowing to cover permanent new spending was unthinkable.

However, that has led to criticism from the Tory right that he has presided over the highest levels of overall taxation since the 1950s — a dangerous image for a prospective leadership contender.

One former minister told the FT that pressure on Johnson and Sunak to postpone the tax rise was growing: “It’s certainly in the mix but any retreat will smack of incompetence.”

In recent weeks MPs had increased pressure on Johnson to scrap the rise, said another former minister, who added: “The national insurance rise is the policy that could most easily be shelved.”

Another former minister said: “We are basically saying to the PM that this is not a good idea.” The MP added that groups of backbenchers had met Johnson to raise concerns over the policy.

“I think we are finally starting to get through to him,” the MP said. “There is fiscal headroom to get rid of this deeply unpopular and unnecessary policy.”

Apart from pressure to shelve the unpopular tax rise, Johnson is being urged by the Tory right to drop other policies and to overhaul his Downing Street team and political operation.

Former Brexit minister Lord David Frost on Thursday endorsed a Daily Telegraph column calling for a culling of “all the neo-socialists, green fanatics and pro-woke crowd” in Downing Street.

Johnson is next week expected to publish a plan to take advantage of “Brexit opportunities” for deregulation — a policy favoured by the Tory right. A package of measures to cushion rising energy bills is also being drawn up.

Meanwhile, a long-awaited white paper on levelling up, intended to set out a strategy for boosting growth in the north, including former Labour “red wall” seats represented by Tory MPs, is expected to be published next week.

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