Johnson Wins Health Care Vote to Push U.K. Taxes to Highest Ever
(Bloomberg) -- U.K. Prime Minister Boris Johnson won a mandate from the House of Commons to raise taxes to the highest level on record to fund health and social care.
The result allows the prime minister to levy a new 1.25% tax on working Britons and their employers, as well as adding an extra 1.25% to dividend tax. The revenue is earmarked to pay for a post-pandemic catchup program in the National Health Service and to overhaul the country’s struggling social care system. It comes just a day after the plans were unveiled in Parliament.
The victory serves to underline Johnson’s authority after the week began with saber-rattling from rank and file members of Johnson’s Conservative Party and even a member of his own cabinet who were alarmed at the prospect of breaking a key election pledge.
Attention will next turn to the possibility Johnson will make changes to his cabinet on Thursday, amid speculation that Education Secretary Gavin Williamson, Foreign Secretary Dominic Raab and Home Secretary Priti Patel all face demotion. Johnson’s office has said there are “no plans” for a cabinet reshuffle, but the premier himself declined to rule one out at a press conference on Tuesday.
The government won the vote by 319 votes to 248 in the Commons.
Despite the green light on Wednesday, the health and social care plan remains a risky proposition for a party that prides itself on keeping taxes down. The Institute for Fiscal Studies estimates that if the tax is brought in as planned in April, it will raise the U.K. tax burden to its highest-ever sustained level since records began in 1955 -- about 35% of national income.
It’s an attack line picked up by the opposition Labour Party. Shadow Chancellor Rachel Reeves called the proposals an “unfair, job taxing, manifesto-shredding, tax bombshell” in the Commons in Wednesday’s debate leading up to the vote. “The Tories are all tax and no strategy,” she said, referring to the dearth of detail particularly on social care.
While Johnson said the plan is designed to “fix” the problems in social care, just 5.4 billion pounds ($7.4 billion) of 36 billion pounds raised over the next three years will go to that purpose. That’s led detractors to suggest the NHS will end up sucking in the bulk of the cash even after those three years are up. Another common criticism is that the plans don’t guarantee that those in need of care won’t have to sell their homes to fund it.
The Department for Health and Social Care will flesh out the proposals in a so-called White Paper in coming months.
The premier himself acknowledged Tuesday that he was breaking an election manifesto pledge not to raise key tax rates, but said the Covid-19 pandemic hadn’t been in anyone’s plans. And at a press conference, he declined the opportunity to rule out any more tax rises during the course of this Parliament -- saying only that he would give an “emotional commitment” that he didn’t want any more.
Chancellor of the Exchequer Rishi Sunak -- whose fiscal conservatism contrasts with Johnson’s love of large infrastructure projects and crowd-pleasing spending -- said that funding social care is a “permanent new role” for the government, requiring a permanent way to pay for it.
“None of us standing here wants to be in a situation where we have to raise taxes,” Sunak said. “There is no easy or perfect way to raise money.”
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