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If anyone needed further proof that Rishi Sunak is a different kind of Tory chancellor, the morning after the Budget before gave us yet more evidence. On the back of his tax-raising plans, Sunak was asked by the Today programme’s Mishal Husain whether he now rejected the traditional Thatcherite idea that lower taxes generated higher receipts.
After twice sidestepping the question, he finally answered with a marmalade-dropper of a reply. First, any increase in receipts from George Osborne’s corporation tax cuts was mainly due to “cyclical” recovery in profits. Second, those tax cuts just didn’t produce the required step change in business investment the country needs. A Conservative chancellor appeared to be saying that the Laffer curve, that article of faith of many modern Tories, was a laughing stock.
It’s worth saying that Sunak still wants the UK to have the lowest corporation tax rate of the G7, so he obviously thinks there is some merit in lower taxes. And when he was a new backbencher in 2015, he actually said Labour’s plan to hike the tax would “damage jobs and growth”. But his sweeping disdain for the Osborne strategy nevertheless depressed some Tory MPs, while delighting some Labour ones.
As shadow treasury minister Pat McFadden says on our Commons People podcast this week, Sunak’s words would suggest “a change in thought not just in policy” for the Tories. Even if it turns out not to be a fundamental shift on tax, it certainly gives Keir Starmer the chance to take a similarly pragmatic approach to corporate taxes in future.
The Resolution Foundation and IFS today had their usual post-Budget verdicts and both agreed that the Budget’s plans for a £4bn cut in some public spending were a problem for the non-austerity messaging of this government. Still, while some departments may look like they are facing the squeeze, I wouldn’t be surprised if more cash was found for them in the spending review later this year.
One reason why a new era of austerity is unlikely is because Sunak himself rejected on Wednesday the idea that he should find “all” the savings to balance the books from public spending cuts. “When we said at the last election that we were the party of public services, people believed us – and they were right to,” he said, sounding the very model of a Johnsonian tax-and-spender.
But it turns out there’s a big “but” to all of this: the government’s new suggestion today of limiting NHS pay rises to just 1%. The prospect of that “pitiful” rise (which could on OBR forecasts for inflation this year even become a real terms cut) means that all Sunak’s warm words about public services will now feel like an ice bath to millions of NHS staff.
The day after a Budget, it’s normally the economic think tank wonks, the Opposition or keen-eyed journalists who manage to unravel a Chancellor’s plans. Yet thanks to its NHS pay plan, the government itself launched the most effective sabotage operation on its own lofty claims to be a different kind of Tory government.
Unless Johnson and Matt Hancock can act fast to change their stance, that Clap For Carers risks becoming a “slap for carers”. The sheer anger of a workforce that has suffered unprecedented pressure to save lives in this pandemic will be very real indeed if the paltry pay rise goes ahead.
The sheer political ineptitude of hitting the pockets of NHS staff who have spent recent weeks delivering the morale-boosting vaccine programme is hard to comprehend. Especially, when ministers have repeatedly said there’s no need to copy the Scottish government’s £500 Christmas bonus for health and care staff in recognition of their pandemic efforts, all the while hinting at a decent pay hike in the coming pay round.
Before news of the NHS pay blunder, the vaccine bounce in the polls continued, as did Sunak’s popularity. The new YouGov poll showing the Tories 13 points ahead was quite something, so too were the chancellor’s sky high personal ratings and the verdict (by 55%) that the Budget was a “fair” one.
Yet the derisory NHS pay offer (which looks driven by the Treasury) fits with Keir Starmer’s claim that Sunak’s nice guy mask will slip one day, even quicker than he hoped.
It also contrasts with Labour’s wider campaign on Tory waste of taxpayers’ cash. How can you turn down a decent pay reward for frontline staff at the same time as paying £1,000-a-day for private consultants, shelling out even more (£37bn now) on Test and Trace and paying out Priti Patel’s bullying settlement of £370,000? Amid the poll gloom for Labour, the waste-plus-unfairness agenda offers the glimmer of hope of their revival.