Ukraine crisis puts Sunak under new pressure to axe national insurance rise

theguardian.com:

Chancellor Rishi Sunak is under renewed pressure from MPs and business groups to rethink plans to increase national insurance next month, as fears grow that Russia’s invasion of Ukraine will dramatically worsen the cost of living crisis and plunge the economy into “stagflation”.

Both Tory and Labour MPs believe Sunak can still be persuaded to ditch the 1.25 percentage point rise – announced last September to fund the NHS and social care – and want him to use the potentially devastating effects of events in Ukraine on prices as justification for what they say is an urgently needed U-turn.

Former cabinet minister David Davis said on Saturday that history showed big rises in oil and gas prices tended to trigger stagflation – when prices soar and economic output collapses at the same time. What was needed, he said, was lower taxation as part of a concerted strategy to stimulate growth.

Davis said: “The case for dropping this rise is even stronger after recent events. We know there are those in government who favour cancelling the rise, and this [Ukraine] gives it a reason for changing its mind.”

Many senior Tories, including cabinet minister Jacob Rees-Mogg and the chair of the Treasury select committee, Mel Stride, have already called for the 1.25 percentage point rise to be dropped. But the government vowed before the Russian invasion of Ukraine to push ahead.

Now, however, the economic context has deteriorated. The invasion has caused oil and gas prices to rise steeply, while supplies from Ukraine of everything from barley to copper and nickel are disrupted. Ukraine is known as the “bread basket of Europe” and its ability to provide for foreign markets is expected to be severely hit, with a consequent effect on prices.

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