Boris Johnson has refused to rule out delaying his planned hike in National Insurance as a leading economist suggested he had enough financial wriggle room to help ease the cost of living crisis.
The Prime Minister refused eight times on Monday to guarantee that the £12 billion tax raid would go ahead in April, when families will also be forced to grapple with surging energy bills and inflation.
However Paul Johnson, the director of the Institute for Fiscal Studies, said there was enough “fiscal room” for a postponement.
“There is certainly the fiscal room to say, ‘let’s not do it this year, let’s leave it until next year’,” he told The Daily Telegraph.
“If your concern is the cost of living issue this year, then economically delaying from this year for next isn’t going to have a major effect on what you’re trying to achieve, which is to pay for health and social care.”
However, Mr Johnson stressed the Chancellor would eventually need to boost revenues to fund the cost of an ageing population.
His intervention came amid mounting opposition among Conservative MPs to the rise, which will bring the country’s overall tax burden to the highest level since the 1950s.
David Davis, the former Brexit Secretary, on Monday became the latest MP to hit out at the “economically unwise” tax raid, introduced to fund the clearing of NHS backlogs and an overhaul of the social care system.
Meanwhile, this newspaper understands that there are renewed splits at the top of Government over the NICs rise, with at least three Cabinet ministers privately arguing for it to be postponed until the cost of living crisis has eased.
Four others have reluctantly accepted the need to press ahead with the increase, while Rishi Sunak, the Chancellor, Sajid Javid, the Health Secretary, and Nadhim Zahawi, the Education Secretary, are leading the push for the tax rise to go ahead.
Echoing their views publicly on Monday night, Simon Clarke, the Chief Secretary to the Treasury, told MPs the tax increase was the “most sensible and honest way” to pay for improvements to health and social care.
But when asked during a visit to a hospital in Milton Keynes earlier in the day whether he could guarantee that the 1.25 percentage point hike in NICs would go ahead in April, Mr Johnson told reporters: “What we’ve got to do is look at all the ways we can address cost of living.”
When asked for a fourth time, he signalled his desire to stick to the tax increase, saying: “Look at what we’re investing in and look at what I think is the number one priority for people living in this country. The NHS has done an amazing job. But it has been under terrific strain.”
He refused eight times to explicitly commit to the increase, saying only that “if you want to fund our fantastic NHS you have to pay for it.”
Speaking shortly after his interview, the Prime Minister’s spokesman adopted a firmer line, insisting the levy was critical to “tackling the massive” NHS backlog which had built up during the pandemic.
Divided among three lines
“Cabinet took a collective decision to take this action, to put money into our NHS, to tackle the backlogs, to resolve the long-standing problem of social care and to fund a pay rise for nurses. The Cabinet stands behind that decision,” he added.
However, it appears that the Cabinet is now largely divided among three lines on the NICs rise: those strongly in favour, those who have reluctantly accepted it, and those who believe it should be delayed.
Discussing the splits last night, one minister said: “It’s not unanimous. When it went through the people pushing it hard were the Health Secretary and the Chancellor.”
A second who was previously sceptical of the hike disagreed, arguing that a delay would merely mean “more debt” and that colleagues needed to “just get on with it”.
Treasury insiders also signalled that Mr Sunak was strongly opposed to calls to fund the health and social care plans through borrowing rather than taxation.
Setting out the Exchequer’s position later, Mr Clarke told the Commons: “I certainly don’t want, and I know the Chancellor doesn’t want, to put more borrowing onto the books when in essence these are structural challenges which need to be paid down, and therefore a tax increase is the most sensible and honest way for us to pay for this.
“And I think it’s in that spirit of total candour that we’re bringing this forward and we believe it is the right thing to do.”