Minister defends national insurance hike as Tory calls grow for it to be scrapped

Tory MP David Davis said the planned 1.25 percentage point rise in April was ‘economically unwise’.

Former Brexit secretary David Davis
Former Brexit secretary David Davis

A Cabinet minister has appeared to dismiss the suggestion of delaying a planned national insurance hike as the move faces mounting opposition.

Senior Conservatives, including former Brexit secretary David Davis, have called for the proposed increase of 1.25 percentage points to be scrapped in the face of cost of living pressures.

Commons Leader Jacob Rees-Mogg is understood to have called for the move – which is designed to pay for long-term social care reforms – to be abandoned, while former Brexit tsar Lord Frost quit his role at the tail end of last year in protest at Government tax increases.

Official figures published last week showed that inflation soared to a near 30-year high of 5.4% in December, while an energy price cap rise in spring is set to stretch household budgets further.

But Education Secretary Nadhim Zahawi said the country would not be “doing ourselves any favours in delaying” the national insurance increase as he defended the decision to put the tax up in April – a move which broke a Conservative 2019 election manifesto pledge.

Mr Davis, who last week called for Prime Minister Boris Johnson to resign over his handling of the partygate allegations, told BBC Radio 4’s Today programme the national insurance rise would remove about 10% of the disposable income of “ordinary families” and was based on the “wrong data”.

He also argued that the national insurance rise was “economically unwise” because it created a “disincentive to work”, would “penalise employers” and “hit the growth of the whole economy”, meaning it would be unlikely to raise the £36 billion forecast by the Treasury.

Education Secretary Nadhim Zahawi
Education Secretary Nadhim Zahawi has defended the national insurance rise (Aaron Chown/PA)

Mr Zahawi said the impact of the policy would be reviewed but insisted it remains the “right thing to do” in order to solve the social care crisis and to reduce the NHS backlog caused by the coronavirus pandemic.

Speaking to BBC Radio 4’s Today programme, Mr Zahawi said: “It is really important to remember that the highest earners, the 14% who earn the most are paying 50% – they are paying half of that contribution, and the lowest earners, 6.1 million of the lowest earners pay nothing, so it is as progressive as we can make it to deal with a problem that breaks many an individual in their old age.

“So it is really important to just focus on why we are doing this, why I think it is the right thing to do, because it will finally create a system of adult social care that is sustainable and deliverable without breaking families.”

Pressed on suggestions the move could “shock” the economy and prevent the tax rise from raising the predicted sums, Mr Zahawi replied: “We will of course make sure we review any policy we introduce – if it is not working, then we will look at it.

“I absolutely believe it is the right thing to do.”

The Education Secretary said there would be £12 billion of “mitigations over the next two years” to help less well off households through struggles caused by the cost of living rise.

Asked on LBC whether the national insurance climb could be postponed, he said: “I don’t think we would be doing ourselves any favours in delaying.”

Labour has regularly voiced its opposition to the national insurance increase, with leader Sir Keir Starmer pledging to take a different approach if elected to Downing Street.

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