“What did he mean by that?” is the famous question the 19th century Austrian diplomat Metternich is said to have asked of Talleyrand when he heard the French statesman had died.
I have the same question to ask of Boris Johnson, to discover the genuine motivation behind his extraordinary tax raid which in one shot has managed to stun his Tory backbenchers into submission, prompt accusations that he’s a “Blue Labour” socialist by some on the right and a traitor to Conservative Party small-state principles and the country’s risk-takers, unite the business world in a state of apoplexy and totally flat-foot the Labour Party. Oh, and he’s annoyed Dom Cummings. Not a bad achievement.
Even more extraordinary, the new Health and Social Care Bill which looks as though it was cobbled together at five minutes to midnight the day before, sailed through the Commons with 319 votes to 248 with only a handful of Conservative abstentions and one vote against.
To Johnson’s obvious joy, Labour voted against the proposal which will see National Insurance Contributions rise by 1.25 percentage points to fund the NHS and changes to the social care system.
You couldn’t see the skewers sticking out of Keir Starmer. But you could feel them piercing the Labour leader’s skin as he squirmed around how best to react. And it was the usual waffle: he didn’t oppose more money for the NHS but said that new taxes should fall on the “broadest shoulders”.
The acid test though for Starmer was that he couldn’t come up with a better alternative, saying only that Labour would tax “all forms of income”, not just work.
It was left to Rachel Reeves, the shadow Chancellor, to explain why Labour was against the proposal which she, rightly, described as a “job-taxing, manifesto-shredding, tax bombshell”. Her words would have not have been out of place coming from any of the rebel Tory backbenchers who are deeply unhappy with the bombshell but too shell-shocked to say anything brave about it.
More pertinently, Reeves asked the right questions, too: “There are two tests for the package announced yesterday. The first: does it fix social care? The second: is it funded fairly? The answer to both is no. It is a broken promise, it is unfair and it is a tax on jobs.” More of that later.
For once, Labour came up with a sensible amendment which proposed forcing the government to conduct an impact assessment of the levy on jobs and businesses, as well as assessing the impact on different income groups and regions.
This would have been the right approach and it’s a surprise that those Tory MPs who were unhappy with or actively objected to the proposal were not ballsy enough to back the amendment.
By far the most bruised from this latest tax burden are Britain’s business leaders, from little to large, who have been royally trumped by the PM and who fear the hikes will damage the already fragile economic recovery.
Since the March Budget, there have been three big tax rises which have fallen mainly on businesses. Analysis by the Daily Mail shows that businesses will be paying a total of £21.8bn of the £37bn of tax raised.
This tax bill comes from the higher rate of corporation tax, upped from 19 per cent to 25 per cent in the Budget, which will raise £17.2bn in 2025-26. Adding in the employers’ share of National Insurance – which is about 40 per cent – gives another £4.6bn, with workers paying the balance of the £11.4bn. The remaining £600 million will come from hiking dividends for company directors who usually pay themselves a dividend on top of a small salary.
Those with long memories which recall the now infamous remark – “F*** business” – which Johnson is alleged to have made at a gathering of EU diplomats some three years ago. While Johnson denied using the swear word, business leaders are under no illusion that this was his intent.
Yet the PM and his Treasury team didn’t have to choose this route. There were many other options other than going for a new NI levy which will hit younger workers the hardest, taking their tax rate to over 40 per cent in some cases.
Equally irrational was the dividend increase which will penalise the country’s small army of freelancers (already being punished with the abolition of IR35), the self-employed, company directors and other risk-takers. In other words, the six million or so SME owners and several million more self-employed who provide the economic dynamic which drives growth and jobs.
Here are just some of the alternative taxes the PM could have put up to raise £36bn over the next three years: a penny or two on income tax; a much tougher top tax rate; slashing capital gains tax for higher earners; closing loopholes in inheritance tax; ending the tax breaks for “carried interest” which allow private equity financiers to be taxed at capital gains rates rather than income.
So what would the Prime Minister admit to in the darkness of the night in answer to Metternich’s question? What did he mean by infuriating so many, as well as betraying the manifesto, the party’s philosophical principles and opening himself up to headlines which screeched that he is anti-business?
Whatever you think of Johnson, the PM is not daft. He may be a man of jelly, all wobbles and prone to wanting everyone to like him. But in this instance, he went into his tax heist like a robber with eyes wide open, taking a calculated risk that none of the guards on duty would have the guts to stop the raid. Looking at how even the most rebellious Tory MPs stayed mute proved his point.
He has skewered Labour, which will now find it almost impossible to ever attack the Tories for wanting to destroy the NHS, thus laying claim to the notion that the nation’s health service is the Conservative’s favourite sweetheart.
And the anti-business stance? Well, he has most big business leaders in his pocket – even the Tory donors who paid for his wallpaper – because they still think he is a winner. Plus, he knows that public opinion is on his side when it comes to fat cats.
Sadly, the popular view of wealth creators – even when they are small enterprises – has been so distorted over the years by the media that any tax hike on the so-called wealthy is seen as fair dibs.
The bigger question is: will these planned changes improve our sick social care system? Whether the new money will be enough to alleviate the obvious problems in looking after the sick and elderly has rather been lost in the fog of the last few days.
It’s impossible to say, although the new thresholds for the cap on residential care look riddled with potential problems as they are still going to be means-tested.
What should have been a tremendous opportunity to come up with an imaginative, cross-party radical plan – a Beveridge-style service fit for the 21st century which could have helped families to look after their elderly – has been thrown under the bus because of pettifogging politicking. What a legacy that could have been.
Now the challenge is to ensure the government – and the NHS – provide a full audit of how all the new funds will be spent. It’s not enough for party purists to simply argue that Johnson has betrayed his party’s principles, that he’s a socialist in disguise and favours a big, high-spending state.
It’s an uncomfortable truth but big spending is here to stay, and it’s been backed fully again by another Conservative government. If they do care about an efficient NHS which doesn’t waste taxpayers’ money, the rebel Tory MPs and sabre-rattling critics should be demanding how the NHS spends its billions and to kick up a fuss if the funds are merely going to prop up an enormous bureaucracy, and one that is ballooning every day: the NHS is about to hire 42 chief executives for new integrated care boards at a cool £270,000 per annum each.
Add into this their public sector pensions and life-time perks, and most NHS top staff are now earning far more than their peers in the private sector: the ones who create the wealth to pay for their salaries.
Anything less than a full audit – and reforms where necessary – would be a travesty. Such scrutiny, however, whether it’s through the select committees or routine questioning, requires huge patience and diligence and will take years to establish.
Yet the PM has taken the risk that by the next election, everyone will have forgotten this September squall and that wage increases – with a bit of inflation – will make up for the difference.
Like Johnson, Talleyrand was a master of disguise: viewed by some as one of the most skilled diplomats in European history while others dismiss him as a cynical exploiter of the masters he served under from the ancien regime through to Napoleon. Ultimately, he served only himself.
