ECONOMY

Health levy shows Boris Johnson’s big-state trajectory for Tories

UK social care updates

“People did know that when they chose Boris they weren’t electing a Thatcherite,” says one close ally of the prime minister. In fact no one was sure what the Tory leader would be but his MPs were desperate enough to subordinate almost all considerations to his status as an election winner.

All assumed he could be controlled in power. His Vote Leave aides, most notably his ex-strategist Dominic Cummings considered him nothing more than a frontman for their own political project. Tory MPs trusted others to keep their chaotic, solipsistic leader in check.

Now, Johnson has presented them with the bill for their bargain and it is a big one: a £12bn tax rise, mostly funded though a manifesto-breaching rise in national insurance, to tackle NHS backlogs and fix longstanding problems with social care. Having unveiled it as a fait accompli to his cabinet, he is now ramming the measure through parliament.

There are multiple criticisms aside from the risk of the broken promise. In as far as the money is to fund social care — and the bulk is going to the NHS in the first years — it looks generationally unfair with younger (and often poorer) workers paying to save the homes of wealthier pensioners. The tax also hits employers and so raises the cost of staff.

But Johnson is trusting his own instincts (and they have served him well this far). He judges that the risks are outweighed by the damage which would follow from a protracted NHS crisis or not meeting his promise to protect older, more affluent voters from the social care lottery.

The new levy and social care plan represent an uncomfortable compromise between Johnson and his chancellor Rishi Sunak. The prime minister wanted the policy without the national insurance rise. But when forced to decide, he chose to tax and spend.

And this is the key point for many of his MPs who were frantically touting alternatives ideas to a tax rise, be it converting Covid debt into a 50 or 100-year “war loan” or simply demanding savings in other areas. Thatcherite Tories have long suspected that their leader lacks their devotion to small government. When many saw Brexit as the precursor to a lower-tax, lower-regulation economy, Johnson was describing himself as a “Brexity Hezza”, a nod to the interventionist former deputy prime minister, Michael Heseltine.

Now they are asking whether, even allowing for the exceptional costs of Covid, they have become a high-spending, higher-taxing government. This week’s increase comes on top of £25bn of measures announced in the budget. The tax burden will now be the highest since 1950.

But while a big call on health might seem exceptional, it is not the end of the spending challenges. Johnson is still resisting demands from his MPs to make permanent the temporary £20 increase to universal credit, but those calls will grow after a social care policy designed to protect the assets of the propertied classes. And then there are calls for more money for schools and to battle backlogs in the legal system as well as the longer-term commitments of net zero and “levelling up”.

The state of the public finances means the chancellor has more leeway than he has been letting on. But while Tories traditionally look for savings and, ideally, tax cuts before an election, Johnson looks increasingly like a leader tilting his party away from such frugality. “It’s the same as always,” says one friend. “He wants to be popular.”

Whether there is a deep conviction or merely a skin-deep instinct may not matter. The path of least resistance will keep pushing Johnson towards higher spending until he judges tax levels to be a political problem.

But if, by commission or omission, Johnson is leading his party down this path, there are three major challenges. The first is he needs a plan for public-service reform to ensure his largesse is spent effectively. The NHS in particular will swallow any sum given and keep requiring more. Spending is easy. Spending wisely requires clarity of vision and a ruthless focus on delivery. That is not a charge regularly levelled at this administration.

This also demands a more effective cabinet. But stronger ministers can be a challenge, so they must also sign up to his direction of travel. Throughout the week, Westminster swirled with unconfirmed rumours of a reshuffle. Cynics dismissed this as a ploy to instil discipline — for all the grumblings in advance his more free-market ministers put up little fight this week. But a reshuffle is overdue, not only to move underperformers but to ensure a team which signs up to his political approach.

The final obstacle is the toughest. A higher-spending government, especially a Tory one, needs a coherent strategy for economic growth. This government does not have one. Current projections after the post-Covid bounce are for growth rates below 2 per cent. Those who saw a Brexit reboot are instead facing a less competitive economy, with exporters facing more bureaucracy and looming corporate tax rises. Mooted productivity gains from levelling up will take years to materialise.

The upshot is that, even allowing for the pandemic, the Conservative party has accidentally placed itself on a long-term trajectory to a larger state and higher spending.

For many Tories, Johnson was the key to securing Brexit and staying in power. But having won the war, the more Thatcherite among them are starting to fear they might be losing the peace.

[email protected]

Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button