The cancellation of the 1.25 point increase national insurance entered into force today. The hike was introduced by the government of former Prime Minister Boris Johnson, when Rishi Sunak was Chancellor in April. It was canceled by former Chancellor Kwasi Kwarteng in his controversial mini budget last month.
His scrapping is one of the few economic policies introduced by former Prime Minister Liz Truss and Mr Kwarteng that was not scrapped by Jeremy Hunt and remained in place with Mr Sunak as Prime Minister.
The levy was devised by Mr Sunak when he was Chancellor to pay for social care and deal with a backlog in the NHS.
Mr Johnson and Mr Sunak insisted in January that it was right to continue the “progressive” policy.
They said: ‘We need to clear the Covid backlog, with our health and social care plan – and now is the time to stick to that plan. We need to move forward with the health tax and care. That’s the right plan.
Mr Sunak told Cabinet members this week that the NHS would be ‘prioritised’ amid ‘tough decisions’ on spending over the coming weeks, according to Downing Street.
The Prime Minister and his Chancellor are currently considering tax hikes for millions of households and spending cuts to fill a black hole of up to £50billion in public finances.
A Downing Street reading of Tuesday’s Cabinet meeting notes that Mr Sunak said the Government would ‘always support the NHS and they will continue to be a priority as tough decisions are made on spending’.
The Cabinet meeting saw the Prime Minister and his top team discuss the NHS ahead of looming new pressures this winter
The Downing Street reading adds: ‘He said in return it was right to look at other ways to improve the service the public receive and he was confident this could be achieved.’
Health spending is one of the main areas that could face further spending constraints, as the government looks for ways to restore fiscal credibility in the wake of Ms Truss’ ill-fated mini-budget.
Mr Sunak and Mr Hunt are expected to extend the freeze on the thresholds at which people start paying the different income tax and national insurance rates, which could lead to more people in higher tax brackets at as wages rise.
Mr Hunt will set out his plans in the November 17 autumn statement and plans to split the burden equally between tax hikes and spending cuts.
Public sector workers could face deep pay cuts in real terms, with the Times reporting that the Treasury is considering a 2% increase across the board for 2023-24, at a time when inflation is expected to be much higher at this threshold.
A Treasury source said “no decision has been made” and that “the Independent Salary Review Body process will take place next year.”
Meanwhile, NHS England has written to local health bodies detailing preparations for potential industrial action in the health service. On Saturday, it emerged nurses across the UK had voted to strike in the first-ever nationwide action over a pay dispute.
The strike vote among more than 300,000 members of the Royal College of Nursing (RCN) was the largest on record in the union’s 106-year history. Its general secretary, Pat Cullen, said: “Our strike action will be as much for patients as it is for nurses – we have their support to do so.”