Slash National Insurance and VAT to get the economy back on its feet, says former chancellor Sajid Javid in challenge to successor Rishi Sunak

  • Mr Javid called for a 'significant temporary' reduction in NI and cut to VAT
  • Used CPS think tank report to warn of a long recovery for the UK economy 
  • In After The Virus he said ministers must make it easier for firms to hire workers
Former chancellor Sajid Javid heaped pressure on successor Rishi Sunak to cut taxes to help Britain recover from coronavirus today as he called for reductions in National Insurance and VAT.
Mr Javid, who quit in February after a bruising clash with Boris Johnson and his aide Dominic Cummings, called for a  'significant temporary' reduction in NI to make it cheaper for employers to take on staff. 
He also said that a 3p VAT cut would pump £60billion into the economy over three years, in a move that adds to pressure on Mr Sunak to take an axe to taxes.
In a report for the Centre for Policy Studies (CPS) think tank he warned that the UK is unlikely to make a swift economic recovery after businesses were mothballed for three months.
'Early hopes of a V-shaped recovery' had 'proved optimistic' he said, and 'some long-term damage to the economy' had become 'unavoidable', with as many as 2.5 million people out of work due to the Covid-19 lockdown.
But in order to speed up the rate of people re-entering employment, Mr Javid argued in the report After The Virus, published on Tuesday, that ministers must make it easier for businesses to hire workers.
'If we want to support and stimulate employment, then axiomatically the best option is to cut the payroll tax - employer's National Insurance,' Mr Javid and the CPS said.
'Tax employment less, and all other things being equal you will end up with more of it.'
Other recommendations made in the report include temporarily cutting VAT and bringing forward 'shovel ready' infrastructure projects, with Mr Javid arguing that the 'only way out of this crisis is growth'.    
Mr Javid, who quit in February after a bruising clash with Boris Johnson and his aide Dominic Cummings, called for a 'significant temporary' reduction in NI to make it cheaper for employers to take on staff
Mr Javid, who quit in February after a bruising clash with Boris Johnson and his aide Dominic Cummings, called for a 'significant temporary' reduction in NI to make it cheaper for employers to take on staff
He also said that a 3p VAT cut would pump £60billion into the economy over three years, in a move that adds to pressure on Mr Sunak to take an axe to taxes
He also said that a 3p VAT cut would pump £60billion into the economy over three years, in a move that adds to pressure on Mr Sunak to take an axe to taxes
Asked about VAT on LBC radio this morning he said: 'What we suggest is looking at a 3p cut, that would cost about £20billion a year so if you had it for a couple of years, you’ve got about £60billion, that’s a huge amount of money.
'I also don’t pretend it’s perfect in every way, in some ways it is a bit blunt but there’s not many better things out there in terms of an immediate stimulus and something that is effective from day one.'
It came after the head of the Bank of England last night revealed the government could have effectively gone bust if it had not bailed it out at the start of the coronavirus crisis.
Governor Andrew Bailey said chaos in the bond markets and on the exchange rates meant the Treasury could have 'struggled to fund itself'.
The extraordinary admission comes after the Bank expanded its quantitative easing programme - printing money - to £745billion last week.
The government has been borrowing huge sums to finance its response to the disease over recent months. Public debt is bigger than GDP for the first time in 57 years, with the state borrowing £55billion in May alone. 
The latest figures show that unemployment climbed to 1.3million last month with worse figures expected to follow. 
In an op-ed for the Daily Telegraph, Mr Javid added: 'With an unrelenting focus on growth and our hardest-hit areas, it is possible not only to rebuild our economy, but to set it on even firmer foundations than before.'
He joins fellow former chancellor Alistair Darling in calling for an emergency VAT cut to boost consumer spending, a move undertaken by the Labour peer after the 2008 financial crisis.
Health Secretary Matt Hancock, asked on Sky News' Sophy Ridge On Sunday programme about whether Chancellor Rishi Sunak could slash VAT, said: 'It's very much a matter for the Chancellor.'
Mr Javid said: 'If we want to secure the strongest possible recovery, it's essential that no stone is left unturned.
'This report sets out more than 50 ideas for maximising growth, supporting businesses and creating new jobs at speed.
'My colleagues in Government have done a fantastic job supporting the economy so far. I hope this report proves helpful for the task that lies ahead.'
Robert Colvile, CPS director, said: 'This is a vision for growth driven by a private sector with the incentives and flexibility to invest and create jobs, empowered by an infrastructure revolution.'

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