Boris outplays Rishi by roping himself to his rival over ill-timed tax rise
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Households across the UK are feeling the squeeze this winter, but Number 10 and Number 11 are adamant tax rises are necessary to further boost health spending and sort out (though it won’t) social care. Tory MPs, and some newspapers, have been campaigning for the rise to be reversed. Our editorial at Reaction at the weekend joined in, on the grounds that hiking taxes now is unwise when consumers are squeezed and the shape of the recovery and Treasury revenues are unclear.
No way, said Johnson and Sunak on Sunday. Taxes have to go up, before they rather oddly claimed to be natural “tax-cutting Conservatives”.
The piece was presented as a signal of unity, the pair supposedly laying down a tough line in the face of financial instability caused by the pandemic.
But what’s really going on here? Raw politics.
Right from the beginning last autumn, the Prime Minister didn’t like this National Insurance increase. His standard line to allies who queried the tax rise was that he hadn’t wanted to do it but the Treasury insisted.
The Treasury briefing to hacks late last year was they had no alternative other than to insist on a tax rise, to remind the spendaholic PM everything has to be paid for. Sunak, it is reported, has taken to calling it the Prime Minister’s tax rise. Not because Johnson wanted that specific tax rise, but rather because it stands as a symbol, a practical example of what flows from the Prime Minister saying yes to everyone demanding ever more largesse with other people’s money. Here, says Sunak, you see implicitly (that word again) what it is like to work with this guy. At least someone is trying to impose order on the Number 10 madhouse. That someone is me, signals Rishi.
Partygate opened it all up again, and introduced the possibility of Johnson in a panic demanding the NI increase be scrapped. A desperate PM fearing the sack had recently toyed with scrapping the tax increase to appease loyalists as part of “Operation Red Meat” – a plan designed to revive his political fortunes. Wouldn’t he grab a chance to ditch or delay it now to please Tory MPs and voters post-Partygate? For a while it seemed he might do anything – sell his granny, sell anyone’s granny – to persuade Tory MPs not to put letters in demanding a vote on his removal. Conceivably, a U-turn would put leadership rival Sunak in his place, showing the PM is in charge and scrapping unpopular policies.
No, Boris chose to stick with the tax rise and rope the Chancellor in, hence the joint effort insisting the rise must go ahead. They seem confident the Tory rebels will not get beyond 20 or so, meaning the measure cannot be halted in the Commons. Perhaps, or perhaps not.
They’re holding in reserve a compromise, adjusting the thresholds on when the NI increase kicks in, in case the rebellion grows and they can then claim to have listened and helped lower and middle income Britons.
For the Prime Minister, the defence of the tax rise (he never wanted in the first place) is a gamble, on the basis that it is unpopular and may grow even more so. But this way he has tied in the Chancellor, making his leadership rival the defender of an unpopular policy that will make Sunak less appealing in the leadership race already unofficially underway. Sunak and Johnson are “in it together” to paraphrase former Chancellor George Osborne.
The Chancellor’s allies will no doubt say this proves he is the grown-up in the room, unwilling to dump a responsible financial measure designed to reduce the deficit and so on. Yeah, maybe.
Critics can counter though. Once again, the Chancellor has allowed himself to be outplayed by a PM who when cornered is a brawler, an expert stitcher-up of rivals.
It should have been perfectly possible for the Treasury to help the Prime Minister and justify a delay, at least. Circumstances have changed, they could have said. That has the benefit of being entirely true. In the era of Covid, governments have made far bigger changes of policy than this, for goodness sake.
Right now, post-pandemic forecasters are trying, and sometimes struggling, to work out the path of inflation, energy prices and the positive effect of a mild winter, geopolitical unrest flowing from the Ukraine crisis, and how squeezed consumers and businesses will respond as demand shifts away post-Covid from goods (stuff) to services. A painful tax rise at just that moment is not sensible especially when growth could surprise on the upside, the Treasury could have said.
Instead, the tax rise goes ahead. With Chancellor Rishi Sunak’s name stamped all over it.