The Prime Minister and the Chancellor have vowed to push ahead with a £12 billion National Insurance hike amid pressure from Tory MPs to ditch the controversial move.
In a joint intervention, Boris Johnson and Rishi Sunak described the levy – which will fund sweeping social care reforms and aim to clear the NHS patient backlog caused – as “the right plan”.
The planned 1.25 percentage point rise in National Insurance Contributions, which is expected to cost the average worker an extra £255 a year, is reported to have led to a Cabinet split.
There has been mounting speculation that Mr Johnson was “wobbling” over the move as he fights to stave off a backbench uprising against his premiership in the wake of ‘partygate’, with Tory MPs urging him to delay or cancel the tax increase.
But, in an article for The Sunday Times, Mr Johnson and Mr Sunak wrote: “We must go ahead with the health and social care levy. It is the right plan.”
They described themselves as “tax-cutting Conservatives” and said they believe “people are the best judges of how to spend their money”.
The article continued: “We are also Thatcherites, in the sense that we believe…there is no magic money tree.”
Political opposition to the change has come from all sides of the Commons, as MPs fear the impact that cost of living pressures could have on stretched household budgets.
Inflation is at a 30-year high after the coronavirus pandemic and the energy price cap is due to lift in the spring, possibly increasing bills by 50 per cent.
Mr Johnson and Mr Sunak countered this by setting out the challenges that the levy will seek to address, writing: “We must clear the backlogs with our health and social care plan, and now is the time to stick to it.
“We must go ahead with the health and care levy. It is progressive: the burden falls most on those who can most afford it.”
Their intervention comes after business leaders renewed calls on Friday for the Chancellor to “think again” about proceeding with what they warned would be a damaging tax blow.
Jonathan Geldart, the director general of the Institute of Directors, warned that the move to increase employer and company NI contributions by 1.25 percentage points would have “a negative and significant” impact on its members and the wider economy.
Mel Stride, the chairman of the Treasury Select Committee, has said the “stars are aligned” to delay the move by 12 months as stronger growth is likely to leave borrowing £13 billion lower than expected this year.
Experts also warned that the added burden on companies would work against efforts by the Chancellor to encourage business investment through the super-deduction tax break announced last March.