Boris Johnson and Rishi Sunak’s plan to press on with the new health and social care levy is not a huge surprise. The deal between them last year to get social care reforms over the line boiled down to a simple principle: new spending projects must be fully funded. That remains as important to the Chancellor today as it was back then. With the Prime Minister still opposed to making cuts elsewhere to pay for his plans, the levy, by default, stays with us.
As I wrote last week, it was highly unlikely that recent updates to public finance figures – showing lower borrowing and higher tax receipts than expected – would count towards Sunak’s definition of ‘fully funded.’ Borrowing figures proved slightly less catastrophic than forecast, giving the Chancellor a bit more fiscal headroom, but with Britain still on track for its second-highest borrowing year in peacetime history, this was not going to be enough to convince Sunak that now is the time for a borrowing splurge, especially on long-term health policy.
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