Rishi Sunak is facing mounting pressure to scrap the National Insurance rise.
Earlier this year, the National Insurance rate went up by 1.25 percentage points from 6 April as the Government attempts to recover from the Covid-19 pandemic.
The fresh calls to scrap the move comes after the Office for National Statistics (ONS) said the rate of Consumer Prices Index inflation increased to nine percent in April from seven percent in March.
The figure was the fastest measured rate since records began in 1989, and the ONS estimates it was the highest since 1982.
Speaking after the announcement, the British Chambers of Commerce (BCC) said the new figures meant a “real chance” of a recession later this year.
The BCC’s head of economics Suren Thiru called for Mr Sunak to reverse the rise in National Insurance Contributions and cut VAT on business energy bills to five percent.
Mr Thiru said: “The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms’ ability to invest and operate at full capacity.
“The marked acceleration in the headline rate in April reflected the continued upward pressure on prices from surging energy and commodity costs, as well as the energy price cap rise and the reversal of the VAT reduction for hospitality in the month.
“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.”
Labour’s Shadow Chancellor Rachel Reeves said they were forcing a vote on an emergency budget as a result of the inflation rise and called for Tories to back the move.
But Chancellor Rishi Sunak said that the inflation problem was global, insisting the Government "cannot protect people completely".
He said: “Countries around the world are dealing with rising inflation.
“Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.
“We’re saving the average worker £330 a year through reducing National Insurance Contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.”
Chancellor Rishi Sunak
Aaron Chown
The ONS said the rate of Consumer Prices Index inflation increased to nine percent in April
Dominic Lipinski
