1. Money

    Patrick O'Flynn

    Why are Boris’s tax rises so popular?

    Why are Boris's tax rises so popular?
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    It is a curious thing to exclude a vast group of generally quite well-heeled voters from funding a policy innovation that they will benefit from more than any other group. One might almost call it blatant favouritism.

    But Boris Johnson’s plan to pay for a big increase in resources going into social care long-term and the NHS short-term amounts to just that. By opting for a National Insurance increase to fund his proposals, the PM is ensuring that nobody over the state pension age of 66 will have to put their hands in their pockets. Neither will the extra financial burden fall on so-called 'unearned' income such as dividends on shares or interest on savings.

    Instead, working people under 66 will suffer a direct hit to their pay packet. What's more, the way NI is levied across income ranges will mean that the highest-paid lose out less than those on average salaries. Given that Johnson promised not to put up NI, this must be a political disaster, right?

    Well, not necessarily. Largely because of its name, suggestive to voters of a hallowed social contract and of ring-fencing too, NI has always been a less unpopular levy than income tax, its partner in crime when it comes to direct confiscation of earnings.

    That’s why when Labour decided to put up taxation in 2002, mainly to fund more health expenditure, Gordon Brown opted for a 1 per cent increase in the rate of NI. Making the case to the electorate that they were getting something back in return was much more straightforward.

    According to the pollster James Johnson, who ran opinion polling in 10 Downing Street under Theresa May, this continues to be true. When it was first reported, earlier this year, that an NI hike had been identified as the best funding mechanism for the PM’s social care reforms, he explained

    If they’re going to have to go for a tax rise, this is the one to go for — when it comes to the politics at least. Consistently polls best amongst the public as the fairest and broadest tax to increase (as long as the richest are being seen to pay a bit more too).

    When challenged about NI being more regressive than income tax and adding to inter-generational inequality, he replied: 'I’m sure. Not saying it’s the right thing. Just that the politics works.'

    The latest YouGov poll on the issue, recording 63 per cent support for an NI rise and just 20 per cent opposition, would seem to bear him out. After the debacle of Mrs May’s proposed 'dementia tax', it is understandable that politics has become the most important test for any Tory social care plan, ahead of actual fairness or traditional Conservative principles.

    But will it actually work? In a sign of normal politics resuming post-Covid and post-Brexit, Labour has decided to behave like a conventional opposition on the issue. Keir Starmer is paying lip service to the notion of a cross-party consensus backing a social care funding plan, but just not this social care funding plan. He told the Mirror

    We do need more investment in the NHS and social care but national insurance, this way of doing it, simply hits low earners, it hits young people and it hits businesses. We don’t agree that is the appropriate way to do it. Do we accept that we need more investment? Yes we do. Do we accept that NI is the right way to do it? No we don’t. But we will look at what they put forward because after eleven years of neglect we do need a solution.

    When pressed about what Labour would do Liz Kendall, the party spokesman on social care, would only say that the party will publish its plans 'before the next election'. In other words, Boris Johnson must walk through this minefield on his own with Labour sniping at him from the sides.

    Amid reports of widespread opposition to his plan at cabinet level and open criticism rife among backbenchers and former ministers, the PM’s majority of nearly 80 suddenly seems less than commanding. A Commons defeat would be a humiliation. But backtracking would only strengthen the idea of him being a premiere in decline, which has already gained ground in recent weeks. 

    Lord Willetts, the Tory former higher education minister, has suggested a way of dealing with the unfairness argument that Sir Humphrey Appleby might describe as 'courageous'. Willetts told Radio 4 that extending national insurance contributions to people over the state retirement age but still working and also applying the tax to other forms of income could solve that problem.

    One can see why Rishi Sunak, a chancellor needing to find new sources of revenue fast, might think that idea appealing. But Boris Johnson, for whom ongoing popularity appears to matter above all else, will surely judge it a case of two brains being too clever by half.