Raise taxes on 25 million to pay for welfare

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This brings us to the other big piece of the pie – money. Throughout the spring and summer, discussions were underway about how to find a financing solution that would raise enough money while being politically palatable.

The talks – perhaps the most secret of any domestic policy issue pursued by the government – were held closely within three Cabinet ministers, Mr Johnson, Rishi Sunak, the chancellor, and Sajid Javid, the health minister.

Understandably, the Treasury initially considered an income tax increase or pension relief reform to raise funds. But instead, the trio settled on a hike in National Insurance.

The route has potential benefits. National Insurance is paid by both employers and employees, which means companies bear part of the burden. It has not gone unnoticed in government that corporate taxes tend to be more politically acceptable than those imposed on individuals.

What should be the increase?

It would also be a factor in increasing revenue for years to come, unlike ideas for a one-time tax which might be an easier sell to voters but would not provide long-term financing. It could raise around £10 billion a year for the Treasury, possibly as much as £13 billion a year if the economy rebounds as the lockdowns end – for now at least.

But what exactly should be the increase? The Telegraph understands that so far, ahead of the expected announcement next week, the Treasury and Downing Street are at odds over which exact number to pick.

It is said that the number 10 has long favored a 1 percent increase to the National Insurance. This means, in broad terms, that the national insurance rate paid on the first £50,000 of per capita income will rise from 12 per cent to 13 per cent. The rate applied to the above income will rise from 2 to 3 per cent.

But the Treasury wanted to go further. According to a source close to the shows, it pushed up 1.25 points. The controversy is said to have not been resolved, and an insider said concerns had been expressed about the Conservatives under attack for imposing “higher taxes than Gordon Brown” if they crossed one point.

Other potentially controversial items have been undone. For example, the National Insurance increase is now not expected to apply to people over retirement age – a change in the status quo that could have triggered a backlash from pensioners.

The Conservatives’ biggest political problem is the 2019 manifesto and its triple tax lock. Even if this tax increase is billed as a “health and social care premium”, if it comes out of the National Insurance, it could leave some Conservative MPs and party members provoked.

But for supporters, there are political opportunities. If the Conservatives take down their tax increase, it could help counter what some see as the biggest strength Labor still has – its historic leadership on the NHS’s trustworthiness in the eyes of voters.

“Personally, I think the Conservatives will take a lot of credit for that,” a former Tory government minister said on Thursday. “Most voters are not ideological. They will think ‘this is hard’. It would be difficult for Labor to make an argument that the Conservatives don’t care about the NHS.”

If that can be achieved, and the promise Johnson made in 2019, he could clear his way to another term.

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