Rishi Sunak today defended the Government’s decision to hike National Insurance as he took a swipe at Jacob Rees-Mogg for calling for the increase to be scrapped.
The Chancellor insisted the rise, which will generate an extra £12billion, is necessary to deal with ‘unprecedented’ backlogs in the NHS.
He also said ‘it is always easy to duck difficult decisions but I don’t think that is the responsible thing to do’ as he appeared to criticise his Cabinet colleague.
Mr Rees-Mogg urged Boris Johnson at a Cabinet meeting yesterday to scrap the looming tax rise in April to take pressure off of struggling families amid the cost of living crisis.
Tory MPs have piled in behind Mr Rees-Mogg, warning that the National Insurance hike cannot be justified while families face soaring food and heating bills.
Mr Rees-Mogg is understood to have suggested the 1.25 percentage point increase to fund the NHS catch-up after Covid and social care reforms should be ditched, pointing to scope for savings elsewhere, including in the civil service.
Whole of Government Accounts for 2018/19 showed the central government wage bill was £103billion.
Mr Sunak is believed to have slapped down the idea of a rethink on the levy during the meeting – pointing out that money had to be found from somewhere.
Downing Street insisted at lunchtime that there are ‘no plans’ to scrap or delay the increase despite a growing Tory backlash.
In a round of interviews this morning, Transport Secretary Grant Shapps insisted the decision had already been taken and there was a ‘very good case’ for the tax rise to fund health and care.
However, the Cabinet clash underlines the growing pressure on the Government to come up with a way of addressing spiking prices and gas costs in the wake of the pandemic.
Labour and some Tory MPs are calling for VAT on energy bills to be cut, but the premier has played down the prospect, with speculation that help is more likely to be targeted on low-income households.
Mr Johnson is expected to try to take personal charge of the crisis next week by holding meetings with the industry, after firms apparently demanded huge taxpayer support in talks with Business Secretary Kwasi Kwarteng.
Tory MPs today piled in behind Jacob Rees-Mogg after he urged the PM to scrap the looming £12billion tax hike to ease the cost of living crisis
Boris Johnson (pictured at PMQs yesterday) is expected to try to take personal charge of the cost of living crisis next week by holding meetings with the energy industry
Could the Government find the £12billion from the NI tax hike from somewhere else?
Whitehall departments are expected to spend £406billion on the day-to-day running of public services in 2021/22, according to the Office for Budget Responsibility.
The £12billion which will be raised by increasing National Insurance would represent just under three per cent of that overall amount.
Three per cent does not sound like very much but finding such a sum from existing budgets would be an enormous challenge.
The highest spending departments this year are expected to be health with £156.4billion, education with £76.3billion and defence with £46billion.
Finding £12billion from any one department would be impossible and while it could potentially be done by axing a variety of projects across Whitehall, the political backlash would be severe.
Mr Rees-Mogg reportedly told Cabinet colleagues that some savings could be found in the civil service and many Tory MPs are likely to be sympathetic to that suggestion.
The Institute for Government think tank recently estimated there are now ‘more civil servants than there were at the time of the spending review in 2010’ when the Coalition government set out plans to massively reduce staff numbers.
As of September 2021 there were 472,700 full-time equivalent civil servants.
In June 2016 the civil service had a workforce of 384,260.
The median salary in the civil service in March 2020 was just under £30,000.
Whole of Government Accounts for 2018/19 show that the central government wage bill was £103billion with £73billion in pension costs.
Cutting staff numbers could therefore generate large savings for the Government.
Downing Street was asked at lunchtime if the Government is considering delaying or scrapping the National Insurance hike.
The Prime Minister’s Official Spokesman said: ‘I think it is important not to lose sight of what the National Insurance measure seeks to achieve.
‘We know that one of the public’s main priorities, main concerns, all of us have been affected by the backlog in our NHS, this money, this £13billion that the levy will raise will in the first instance go towards tackling that backlog.
‘That is what the public want to see, that is their priority and that is what we will deliver on.
‘In the longer term it will also tackle another fundamental issue that has been left aside for too long which is the unfairness in our current social care system.
‘Those are two key priorities for the public that need to be funded. We are doing that in a fair and progressive way and that is why we are taking this approach.’
Asked to confirm that the Government is not considering a delay, the spokesman said: ‘There are no plans to do that, no.’
The PM’s spokesman said that the Cabinet had ‘collectively’ agreed to impose the tax hike.
Mr Sunak defended the National Insurance rise this afternoon when he was asked about Cabinet splits on the issue during a visit to a vaccination centre in Haywards Heath.
He said: ‘I have enormous respect for all my colleagues and if you take a step back and look at why we are in this situation it is because we are facing an unprecedented level of backlogs in the NHS.
‘We as a Government don’t think it is acceptable, we don’t want families to be waiting years and years to get the treatment they need, we want investment in more doctors, more nurses, more operations.
‘We are also doing the thing that governments before us have not done and that is to finally fix social care.
‘Look, it is always easy to duck difficult decisions but I don’t think that is the responsible thing to do.
‘I think people’s priorities are for us to invest in the NHS, to invest in social care and we need to make sure that those investments are funded sustainably. That is what we are doing and now we have got to get on and deliver that change for people.’
Mr Rees-Mogg had tried to cool the row this morning, telling the House of Commons that Conservatives believed in ‘fiscal good sense’ and services had to be paid for – although he dodged commenting on the National Insurance rise specifically.
Taking his regular business questions, Mr Rees-Mogg said: ‘There is no magic money tree.’
Allies insisted he was ‘a loyal supporter’ of the PM, and declined to comment on his intervention in Cabinet.
He has previously made clear his unhappiness about tax rises, highlighting that the burden is set to be the highest on record.
However, allies told MailOnline he had been ‘cheered’ by the PM’s refusal to bow to calls for tougher Covid curbs before Christmas.
Senior Tories today welcomed the news that the case against hiking NI was finally being made in the Cabinet.
Former minister John Redwood told MailOnline: ‘I think there is a lot of support on the Tory back benches.
‘It would be very surprising if Cabinet members were not discussing this. It is what the back benches and the country are discussing.
‘The Cabinet ought to change its mind on this topic. They led the manifesto which ruled out a national insurance rise.’
Sir John pointed the finger at Mr Sunak, saying he was fixated on unreliable forecasts from officials.
Chancellor Rishi Sunak is believed to have slapped down the idea of a rethink on NI – pointing out that money for the NHS and care had to be found somewhere
The energy price cap is due to be reviewed in April and experts expect it to rise by more than 50 per cent
‘The Treasury is the block on it (abandoning the NI rise), quite wrongly. The Treasury, guided by the Office for Budget Responsibility, which has been wildly wrong on all its forecasts for several years,’ he said.
‘Their tax rises are now sandbagging the recovery and paradoxically will mean less revenue than if we went for growth with lower tax rates.
‘Their policy is deeply damaging, they need to back off because the party and the country is saying to them we cannot afford a national insurance rise squeezing our incomes more in April when our gas and electricity bills are going to go up a lot.’
Another senior Tory MP said their first response was ‘well done Jacob’. ‘It is about time Jacob started being Jacob,’ they told MailOnline.
‘It is reassuring that people in the Cabinet are asking these questions…
‘Why have we invented a new tax and why are we bunging up NI when what we should be doing is getting the economy going, getting people in work and creating wealth that way?
‘The interesting thing is the Chancellor’s reaction. He is supposed to be this true believer in cutting tax.’
The MP added: ‘A lot of people have been saying ‘why isn’t anyone in Cabinet being Conservative?’…
‘What Jacob is saying is what I think most Conservatives MPs think, including those in the government.
‘When we do something Conservative we go up in the polls. What people should be looking at is cutting taxes to get more income through growth and maybe not spending so much money on things. You know – being a Conservative government.’
The wrangling emerged as business leaders warned that spiralling energy prices could lead to higher shopping bills and add a further two per cent to rising inflation.
A British Chambers of Commerce survey of almost 5,500 companies found three out of five expect their prices to increase in the next three months as they pass on extra energy costs.
Families are also being warned that domestic gas and electricity bills could rise by as much as 50 per cent in April as the energy price cap is hiked.
Mr Johnson has rejected demands to suspend green levies on household bills to ease pressure on consumers.
At a meeting with Business Secretary Kwasi Kwarteng yesterday, energy company chief executives called for the levies to be removed from bills along with VAT.
They also asked the Government to provide loans so they can in turn help customers and for an increase to the £140-a-year warm homes discount available to the poorest households.
Asked if any of the ideas would be implemented imminently, the Prime Minister’s spokesman said: ‘I’m not aware of any further changes at the moment, but obviously we keep it under review and are listening to those that are most affected.’
On the question of whether green levies will be kept on bills, he replied: ‘There’s no plans to change that approach.’
This week the Prime Minister also appeared to rule out cutting VAT on fuel, saying it wouldn’t benefit those most in need.
At Business Questions today, Mr Rees-Mogg said Labour could only call for cuts to taxes like VAT on fuel because the UK had left the ‘megalithic state’ of the EU.
Shadow Commons leader Thangam Debbonaire said: ‘Perhaps he turns out to be more socialist than he has hitherto let on. Given that, according to the Financial Times, he is now asking his own Government to scrap the National Insurance tax rise, something we have been calling for since it was announced… I wonder – is he about to cross the floor? There is space.’
Mr Rees-Mogg replied: ‘She thinks that I may be converted to her way of thinking. I think this is wishful thinking, it has to be said, because as her question went on and on it became clearer and clearer that not only is she now referring to taxpayers’ money – a good Tory principle, we always call it taxpayers’ money because we recognise there is no money from anywhere else – but also she is becoming Eurosceptic.
Kwasi Kwarteng held talks with energy industry chiefs yesterday amid mounting pressure on the Government to do more to tackle the cost of living crisis
‘She has become a staunch Brexiteer because the only way our socialist friends can advocate cutting VAT on fuel is by having left the European Union. If we were still in the megalithic state that she used to so campaign for… we would not be able to cut VAT on fuel.’
Mr Johnson faced a number of bruising exchanges over rising energy bills and soaring inflation as he was grilled during PMQs in the Commons yesterday.
Sir Ed Davey, the leader of the Liberal Democrats, said the PM should be taking greater action now because many families are ‘already afraid even to open their heating bills’ ahead of further price rises in April.
Tory MP and former minister John Penrose said the crisis requires a major overhaul of the energy price cap to protect households as he told Mr Johnson the UK must get to a position of energy self-sufficiency in order to ‘uncouple us’ from Russian gas.
Labour deputy leader Angela Rayner accused the PM of failing to take the threat of spiking inflation seriously enough as she warned households are facing ‘ballooning prices’.
Meanwhile, the Tory chairman of the Education Select Committee, Rob Halfon, called on Mr Johnson to suspend green levies to cut household energy bills.
The energy industry body warned the expected rise in April of the domestic energy price cap could lead to a further two per cent rise in the cost of living.
Figures published last month showed inflation was already running at 5.1 per cent in the 12 months to November, its highest rate in ten years.