Boris Johnson is facing growing demands from his own party to make a dramatic U-turn on planned national insurance tax increases in response to Britain’s worsening cost of living crisis.
On a day of renewed pressure for the prime minister, the former Conservative cabinet minister David Davis threw his weight behind calls for the tax increase due to come in from April to be scrapped. Business leaders and opposition parties also warned urgent action is required to help households with the highest rates of inflation for 30 years.
Davis, who last week called in parliament for Johnson to resign, said the national insurance plan announced by the prime minister last year as a way of funding health and social care should be dropped because of the severe financial pressures already facing households.
“It was a judgment made on, frankly, quite a lot of wrong data,” Davis said, speaking on BBC Radio 4’s Today programme. “They didn’t know at the time that by April we would have the highest inflation rate in 30 years, they didn’t know that interest rates would be going up, council tax would be going up, the fuel price is about to jump by £700 a year for the average family. Therefore, they didn’t know quite what pressure there would be on ordinary people.”
Davis last week told Johnson that he should “in the name of God, go” because of his response to the allegations about his attendance at parties – a reference to words said to Neville Chamberlain after a series of failures at the start of the second world war.
The MP’s latest intervention comes as business leaders warned on Monday that the planned tax increase would add to pressures on the British economy from high inflation. National insurance contributions, which are paid by employers and workers, are scheduled to rise by 1.25 percentage points at the start of the new tax year in April, in a manifesto-breaking move to raise £12bn to increase NHS funding by Rishi Sunak and Johnson.
However, the Institute of Directors lobby group said 38% out of a poll of 500 of its members would offset the tax rise by raising their prices. Kitty Ussher, the chief economist at the IoD, said: “Our data shows that the tax rise is itself inflationary at a time when prices are already rising fast.
“Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans.”
With pressure growing on the prime minister on several fronts, Johnson resisted calls to scrap the planned rise. While speaking on a visit to a hospital in Milton Keynes on Monday, he told the media it would provide vital funding for health and social care.
“What I’m telling people is, if you want to fund our fantastic NHS, we have to pay for it – and this government is determined to do so,” he said.
It came as the government faced demands during an opposition day debate in the Commons led by the SNP to launch a package of support measures to help people with soaring living costs.
Official figures last week showed the rate of inflation – which measures the annual increase in average consumer prices – jumped to 5.4% in December, the highest level since March 1992.
David Linden, the SNP spokesperson for work and pensions, said that instead of responding to the emergency, the Conservatives were in a state of “civil war and besieged by paralysis”.
He said: “They’re indulging in navel-gazing while our constituents are stuck in the middle of an economic tornado.”
Simon Clarke, the chief secretary to the Treasury, said the government had provided £400bn of direct economic support during the pandemic to help with living costs and was “constantly considering what more we can do”.
He warned that a national insurance U-turn would fail to deal with challenges for funding healthcare and repairing the public finances after the UK’s national debt rose to more than £2.3tn during the pandemic.
