Tax increase could ‘devastate’ employers says small businesses

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The Prime Minister is set to announce as soon as this week his plan to hike national insurance in order to fund extra social care spending. The rise is set to also help deal with the NHS backlog created by the pandemic.

Mr Johnson has spent the summer working with Chancellor Rishi Sunak and Health Secretary Sajid Javid to thrash out the plan which he vowed to implement at the last election.

Several Cabinet ministers and a large number of Tory backbenchers are thought to be infuriated by the plan to raise national insurance.

The plan would break a commitment not to increase the tax made by the Conservatives in their 2019 manifesto.

But in the face of the opposition, Mr Johnson has been accused of being in “invincible mode”, eager to push through his social care plan regardless.

He is understood to see fixing the social care system as an important part of his legacy in No10.

The Prime Minister wants to unveil a plan to help fund the rising cost of social care but also stops those in need of help selling their home to cover the cost of support.

It is thought Mr Johnson and Mr Sunak have agreed that lifetime contributions on care will be capped at about £80,000 and National Insurance will be increased by 1.25 percent to raise between £10billion and £11billion per year.

“The PM is in invincible mode in meetings,” a Treasury source told The Times.

“Rishi’s team has proposed a series of cheaper alternatives but none works for the PM.”

With anger rising in the Conservative party over the plans, Jacob Rees-Mogg publicly spoke out against the national insurance rise yesterday.

Writing in the Sunday Express, the Cabinet minister warned when George Bush Sr broke his “ready my lips, no new taxes” pledge in 1988, he lost the next election.

He wrote: “Voters remembered these words after President Bush had forgotten them.”

Ex-cabinet minister John Redwood said: “If an elderly person goes to live permanently in a care home it often makes sense for them to sell their former home.

“Otherwise it would cost them money to pay the tax on it whilst unoccupied and in need of maintenance.

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“The Treasury should not be demanding any tax rises on the back of wildly pessimistic forecasts of the deficit.

“It overstated it by a massive £90billion for last year and this year it is already £26billion below its forecast.”

Lord Hammond, chancellor between 2016 and 2019, also attacked the plans over the weekend.

He told Times Radio: “I think that if the Government were to go ahead with the proposed increase in National Insurance contributions, breaking a manifesto commitment in order to underwrite the care costs of older people with homes, I think that would provoke a very significant backlash.”

He vowed to vote down the proposals if the legislation was put to a vote in the House of Lords.

Some Conservatives have also voiced concern that the proposals would hit all workers equally, regardless of how much they earn.

Conservative former Prime Minister Sir John Major accused the proposals of being “regressive”.

He called for Mr Johnson to take the “straightforward and honest” approach of increasing general taxation.

The Labour Party has already criticised the plan for not being fair, but Sir Keir Starmer has failed to outline how his party would fund social dare reform.

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