Tax pledges and broken promises sum up shaky economic track record of the PM

‘Read my lips – we will not be raising taxes on income, or VAT, or National Insurance, for the lifetime of Parliament’

‘VAT on household bills makes gas and electricity more expensive. When we vote Leave, we will be able to scrap this unfair tax’

Boris Johnson told his Cabinet yesterday that “the way forward” for the Government is to deliver tax cuts that will drive economic growth.

He made a similar pledge on tax cutting in a letter to Conservative MPS before Monday’s confidence vote in his leadership, and had promised to be a tax-cutting Tory long before he became leader.

Yet Mr Johnson’s track record as Prime Minister so far tells a very different story. Britain is heading for the highest tax burden since the Second World War and public spending as a share of GDP is higher than at any time since the 1940s.

Today is tax freedom day, the day when workers metaphorically start earning money for themselves rather than the taxman, and it falls a whole week later than last year.

An audit of Mr Johnson’s pronouncements on the economy shows that he could swiftly bring the tax burden down if he followed through on previous pledges.

PERSONAL TAXATION What he said:

During the 2019 Tory leadership contest Mr Johnson pledged to raise the threshold for the 40p higher rate of income tax from £50,000 to £80,000, which would help a quarter of earners at some point in their lives, according to the Institute for Fiscal Studies. Mr Johnson said this would take three million earners out of the higher rate tax band.

Mr Johnson had previously used a 2018 column in The Daily Telegraph to advise his party that: “We should say that tax henceforward will not go up.” Instead, he said, taxes should be cut and thresholds raised so that workers keep more of their hard-earned money, enabling them to spend it and promote economic growth.

Also in 2018, he said that the Government should be looking “not at rises but at cuts to income tax, capital gains tax and stamp duty”.

Meanwhile, the 2019 election manifesto promised to keep the “triple lock” on pensions, meaning state pensions would always rise in line with average earnings, inflation or 2.5 per cent, whichever was higher, to ensure that “older people have the security and dignity they deserve”.

What he did: By the time of the 2019 general election his pledge on the higher rate income tax threshold had been ditched and, instead, income tax thresholds were frozen until 2025-6, meaning that ever more people were sucked into the higher rate as incomes went up. Instead of a tax cut, it was a “stealth” tax increase.

The Office for Budget Responsibility forecasts that the policy will create two million more higher-rate taxpayers, rather than the three million fewer he promised in his pitch to Tory members. His zeal for cutting capital gains tax and stamp duty fizzled out, to be replaced by a “tax guarantee” that income tax would not increase.

In March, Rishi Sunak, the Chancellor, announced an intention to cut the basic rate of income tax by 1p, though a 1.25 percentage point increase in National Insurance meant people will still be worse off.

Stamp duty was, temporarily, cut during the pandemic, between July 2020 and March 2021, before the cut was reversed. Meanwhile, the pensions triple lock was scrapped – temporarily, ministers say – and in 2022-23 pensions will go up by 3.1 per cent, far below inflation and wage growth.

NATIONAL INSURANCE

What he said: Mr Johnson promised in the 2019 general election manifesto that there would be no increases in National Insurance.

In the 2019 leadership election, he went further by pledging that he would align the income tax and National Insurance thresholds, so that NI would not be payable on the first £12,500 of earnings. In the manifesto he said it was his “ultimate ambition” to do this. In a 2019 interview on LBC radio he said: “Read my lips – we will not be raising taxes on income, or VAT, or National Insurance, for the lifetime of the Parliament”.

What he did: Instead of freezing National Insurance, Mr Johnson increased it, imposing a 1.25 percentage point increase which he said was needed to address NHS waiting lists caused by Covid and to fix social care funding. He called the rise a health and social care levy, in an attempt to avoid calling it a National Insurance rise. He argued the increase was “necessary, fair and responsible” but he faced a backlash by his own MPS who urged him to scrap or delay it.

Mr Johnson and the Treasury attempted to offset this by raising the threshold for the point at which NI contributions become payable. From July 6 the threshold will be increased from £9,880 to £12,570, meaning more on the lowest incomes will not pay NI.

VAT, FUEL DUTY, SUGAR TAXES What he said: Another one of Mr Johnson’s “tax guarantees” during the 2019 general election was that VAT would not be raised.

The ability to lower the tax was one of the post-brexit freedoms championed by both Mr Johnson and Michael Gove during the EU referendum campaign.

In 2016, the pair wrote in The Sun: “In 1993, VAT on household energy bills was imposed. This makes gas and electricity much more expensive … when we vote Leave, we will be able to scrap this unfair and damaging tax.”

They also said that fuel bills would be “lower for everyone”.

Fuel duty, currently 52.95p per litre on petrol and diesel, was not mentioned in the 2019 manifesto, which was keen to push forward some

green credentials such as phasing out the sale of new petrol and diesel cars.

Taxes on sugar and salt in unhealthy foods were also mulled over by Mr Johnson in his leadership campaign, where he pledged not to introduce any levies until a review was complete. What he did: The pandemic gave the Conservatives the opportunity to lower VAT for the hospitality industry, which had been decimated by the loss of footfall from lockdown.

VAT fell to 5 per cent during the pandemic, rising to 12.5 per cent in October, before rising again to 20 per cent in April this year. The move, which impacted the recovery of industry, was called “catastrophic” by business groups, who said it would have a knock-on effect on inflation and hurt businesses leading the charge of the pandemic recovery.

The Chancellor’s Spring Statement announced that fuel duty was to be cut. It saw the rate cut on petrol and diesel by 5 pence per litre across the whole of the UK (though VAT remains payable at 20 per cent).

This rate cut did not extend to that of household fuel bills, which Mr Johnson had argued was a Brexit “dividend” he wished to explore. On further levies on food, despite Henry Dimbleby’s National Food Strategy recommending a £3/kg tax on sugar and a £6/kg tax on salt in processed foods, the proposals were binned.

BUSINESS TAXES What he said:

On the subject of corporation tax, Mr Johnson said in July 2019 that “every time corporation tax has been cut in this country it has produced more revenue”, and he has repeatedly cited the 14th century Tunisian scholar Ibn Khaldun, who observed “if you cut taxes on the olive harvest, then actually people grew more olives and tax yields went up”.

He expressed a desire to cut corporation tax from 19 per cent to 17 per cent and suggested in a speech to the CBI ahead of the 2019 election that Jeremy Corbyn would “whack it straight back up to the highest levels in Europe” at 26 per cent.

In the 2019 Tory manifesto, Mr Johnson made a clear commitment to “cut the burden of tax on business by reducing business rates”. He also promised that “we will keep costs down for small businesses – rather than hiking their taxes and crushing Britain’s prosperity”.

Nor is he a fan of windfall taxes, saying in May this year: “I don’t think they’re the right way forward. I want those companies to make big, big investments.”

What he did: Within months of becoming Prime Minister Mr Johnson had scrapped his plans for a corporation tax cut and instead oversaw plans to increase it to 25 per cent by 2023, pushing the UK down the international competitiveness leaderboard.

The Government has tinkered around the edges of business rates but fallen short of the major overhaul he promised. While temporary cuts were made during the pandemic to the tax based on the rateable value of a property, a permanent reduction in the business rates burden has been kicked into the long grass.

Mr Johnson also U-turned on his opposition to a windfall tax, and authorised a one-off levy on the profits of oil and gas giants.

Business has also been stung by Mr Johnson breaking his promise not to increase National Insurance. Industry leaders have warned against increasing the “jobs tax” by lifting employer NI contributions and making it more expensive to hire staff.

THE ECONOMY What he said:

In October 2021 Mr Johnson promised that: “We are not going back to the same old broken model, with low wages, low growth, low skills and low productivity.”

In his first speech as Prime Minister, Mr Johnson vowed to “close the opportunity gap” with “higher wages” and “higher productivity”.

What he did: Official forecasts suggest little progress has been made to shake the UK economy out of pedestrian GDP growth and lacklustre productivity gains.

The Bank of England expects GDP to fall 0.25pc next year and endure a tepid bounce back the following year amid the cost of living crisis.

Forecasters see few immediate signs that productivity growth will pick up from the dismal post-financial crisis period and business investment is yet to recover to pre-pandemic levels despite incentives such as the “super deduction”. Economists also question his plan to revive wages by cutting off the supply of labour from Europe, warning that higher productivity growth is needed to sustain pay rises.

Despite Mr Johnson’s promise to “level up” the country, figures released yesterday show that London has been the best-performing region since 2019 while the West Midlands and North of England lagged well behind the capital on growth in recent years.

THE COST OF GOVERNMENT What he said:

‘We will keep costs down for small businesses – rather than hiking their taxes and crushing Britain’s prosperity’

‘We are not going back to the same old broken model, with low wages, low growth, low skills and low productivity’

Mr Johnson has been clear that in order to increase spending on Government priorities such as the NHS, education and policing, departments must cut waste in other areas to minimise the amount of funding to come from taxation.

Yesterday, he told his Cabinet he will ask each of them to make sure they are thinking the whole time “about cutting the costs of government”. He said this was to “make sure that we understand that in the end, it is people who have the best feel for how to spend their own money rather than the Government or the state”.

Earlier this year, Mr Johnson said the Government would save £5.5 billion by cutting waste, including an £800million cut in the funding of quangos. In May, Mr Johnson unveiled plans to cut 91,000 civil service jobs. What he did: Under David Cameron the Civil Service shrank to 384,000. But as the UK prepared to leave the EU, extra staff were taken on, a number which grew during the pandemic. By the end of 2021 the Civil Service had ballooned to 475,000 under Mr Johnson. Despite his promise to cut the Civil Service back to its 2016 levels, no details of how that will be achieved have been made public. The PM wants ministers to come back to him within days with ideas for how they will slash the head count in their departments.