Johnson Faces Tough Return to U.K. Parliament Amid Tax Fight
(Bloomberg) -- U.K. Prime Minister Boris Johnson returns to Parliament to face a backlash from members of his Conservative Party over reports he is planning a manifesto-breaking tax hike on British workers to pay for social care.
Tory lawmakers and former ministers are warning that the premier risks losing voters if he goes ahead with a 10 billion-pound ($14 billion) increase in national insurance, something the 2019 election manifesto pledged not to do.
Jacob Rees-Mogg, the leader of the House of Commons, used a newspaper column to remind readers that former U.S. President George H.W. Bush paid a heavy political price for breaking his “read my lips, no new taxes” pledge in 1988. Opposition Labour Leader Keir Starmer told the Daily Mirror on Monday that his party opposes using national insurance to fund social care.
At issue is that unlike income tax, pensioners don’t pay national insurance, so under the government plans, the burden would fall more on lower earners. The row threatens to provide a stern test of Johnson’s majority when he tries to steer any plans on social care through the House of Commons, where, about 40 Tory rebels would be enough to derail the proposal.
“This way of doing it simply hits low earners; it hits young people and it hits businesses,” Starmer told the Mirror.
Others voicing concern over the weekend included former Chancellor of the Exchequer Philip Hammond, former Prime Minister John Major, the opposition Labour Party and trade unions. On Monday, Jake Berry, an influential backbencher who leads a block of Northern Conservatives told BBC Radio that he doesn’t think it’s reasonable for low-earners to support wealthier pensioners.
“I personally just don’t believe that an increase in national insurance is a fair and equitable way of doing it,” Berry said. “I would prefer a conversation with the government about increases in income tax, other business taxations, to look at properly funding the system.”
The warnings set the stage for a bruising week for Johnson as lawmakers reconvene following their summer break.
On Monday, the prime minister will be forced to defend his handling of the Afghanistan crisis. He is expected to reiterate his pledge to use “every economic, political and diplomatic lever” to help the Afghan people and protect Britain, according to extracts of his statement to Parliament released by his office.
Along with an announcement on social care, Johnson and Chancellor Rishi Sunak are this week also expected to confirm the ditching of a “triple lock” pledge to increase pensions by the highest of inflation, wages or 2.5%.
Sunak was forced to review the commitment after distortions created by the pandemic caused wages to increase almost 9% over the past year, which would mean finding billions of additional pounds at a time when he is trying to reduce the pandemic-bloated budget deficit.
Downing Street and the Treasury declined to comment on what they called speculation over social care, a system that supports the elderly and those with disabilities.
“We’ll set out details on our long-term plan to reform the social care system and resolve a decades-long issue in due course,” Johnson’s office said in a statement.
Johnson has made fixing the social-care crisis a test of his premiership. The system, under which only the poorest and neediest qualify for publicly funded support, is under growing pressure as people live longer and spend more years in bad health.
Many Tories are concerned that raising NICs, a payroll tax, to overhaul the system could alienate supporters, particularly those in poorer regions who abandoned Labour for the Conservatives in 2019. Critics also point out that an increase in NICs would fall heavily on workers while sparing pensioners.
“Economically, politically, expanding the state further in order to protect private assets by asking poor people to subsidize rich people has got to be the wrong thing to do,” Hammond, the former chancellor, told Times Radio on Sunday.
A 10 billion-pound boost to social care funding would require employees and employers each to pay an extra 1% in national insurance. Health chiefs are also demanding cash to clear a treatment backlog that built up during the pandemic, though that could be financed from a fiscal windfall gifted by lower-than-forecast borrowing so far this year.
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