The 1.25 percentage point increase in National Insurance will cost middle-earning households around £300 a year and much more for richer households, according to analysis by the Resolution Foundation think tank.

On Wednesday, Boris Johnson faced calls from his backbenchers to produce an exit strategy from current Covid-19 restrictions and show how the UK can “live with this virus” in the long term.

Theresa May, the former Tory prime minister, said it was “not in the national interest to partially or wholly shut down sectors of our economy every time we see a new variant”.

Addressing the House of Commons, the Prime Minister confirmed that the Cabinet had approved plans to continue with “Plan B” restrictions in the face of the omicron surge.

It means that legally-binding face mask requirements, work from home guidance and Covid passports in large crowd venues are set to remain until January 26 in England. No tightening of the rules is imminent.

Mr Johnson also announced a significant easing of Covid travel restrictions.

People travelling to the UK will no longer have to take pre-departure Covid tests, self-isolate on arrival or take a PCR test once back, saving holidaying families hundreds of pounds.

Nicola Sturgeon, the Scottish First Minister, on Wednesday cut Scottish self-isolation requirements from 10 to seven days, matching a move made by Mr Johnson for England.

Ms Sturgeon, the SNP leader, had adopted a more restrictive approach to Covid rules over the Christmas break. She said on Wednesday she would make “no apology” for the early caution.

Concern remains within the Government about how the surge of omicron cases could impact industries of critical national importance to the UK, with the situation being closely monitored.

Cutting the seven day self-isolation requirement to five days – a move taken by America – was said to be “under review”, though Downing Street sources played down the chance of the change being adopted soon.

Absenteeism in the public sector

It also emerged on Wednesday that trade unions are telling members they can stay off work for 28 days without a sick note amid fears new rules to battle Covid-19 are fuelling absenteeism in the public sector.

A month ago, workers had to produce a sick note after seven days of absence but that was increased to 28 days by the Government to ease pressure on GPs. Unison, Britain’s biggest public sector union, circulated the legal change to its 1.4 million members.

Mr Johnson also appeared to open the door to approving a fourth round of Covid-19 vaccine doses for frontline healthcare workers and other vulnerable people, saying in the Commons that independent science advisers were considering the idea.

During the first Prime Minister’s Questions since the Christmas break, Mr Johnson was peppered with calls to provide extra help for households facing a steep rise in the cost of living this year.

In April, energy bills are set to soar when the price cap is increased amid gas supply problems. Tax rises will also kick in that month – both the increase in National Insurance and the freezing of income tax personal thresholds.

The National Insurance rise, announced by Mr Johnson in September, was a major political gamble. It broke an explicit Tory manifesto pledge from the December 2019 election in order to help fund a £36 billion investment in the NHS and social care reform.

‘Long-term plan for living with Covid’

Mr Rees-Mogg privately cautioned against the change at the time. His decision to call for the tax rise to be scrapped in Cabinet on Wednesday reflects a widespread discomfort on the Tory benches at Mr Johnson pushing the tax burden to its highest point since the 1950s.

Mr Sunak is understood to have rejected the suggestion at the Cabinet meeting, arguing that scrapping the tax rise would mean billions of pounds needed to tackle NHS backlogs would have to be found elsewhere.

In the House of Commons debate about Covid strategy, a number of Tory MPs pushed the Prime Minister to spell out his proposed exit plan from Covid restrictions in the long term.

Mark Harper, chairman of the lockdown-sceptic Covid Recovery Group, said: “We cannot respond to every new variant in the way we have to this one. We have got to have a plan to live with this virus, like normal, forever.”

Steve Brine, a former health minister, pressed Mr Johnson on a “long-term plan for living with Covid in 2022” and suggested the current measures were not “sustainable”.

During his responses Mr Johnson indicated that by the end of January there was a “good chance” of “getting back to something like normality as fast as possible”.