‘I’ve always believed in free markets, light regulation and low tax for growth’
Sajid Javid throws hat in the ring with a fiscal policy the antithesis of rival Rishi Sunak’s
In recent weeks, Rishi Sunak has been at pains to tell the Conservative Party and wider country that Britain cannot afford tax cuts. Today, Sajid Javid, his predecessor as chancellor, launches his rival leadership bid in The Sunday Telegraph with a simple message: “We cannot afford not to have tax cuts.”
Sitting opposite a portrait of Margaret Thatcher in his Commons office, Mr Javid sets out details of the economic plan that he will present to Tory MPs as part of a bid centred on making the party “Conservative again”. He draws a clear dividing line with Mr Sunak, the contender with the most advanced leadership campaign, by insisting that not only is the former chancellor wrong to insist on waiting for the economy to improve before cutting taxes, but “you can’t have growth until you’ve got the tax cuts”.
Speaking at the end of one of the most turbulent weeks in modern British politics, he also describes the moment he resolved to walk out of Boris Johnson’s administration – triggering a domino effect that ultimately led to the Prime Minister’s decision to stand down. His departure was inspired by a sermon about responsibility on Tuesday morning, he says, adding: “I know it sounds strange, but it made me reflect.”
The former health secretary reveals that he would scrap the National Insurance hike introduced to fund a massive increase in NHS spending; bring forward the planned 1 per cent income tax cut to next year; reverse the proposed corporation tax increase in favour of dropping the level from 19 per cent to 15 per cent; as well as introducing a temporary “further significant cut in fuel duty” to help with the cost of living crisis in the short term.
Mr Javid reels off the cost of each measure and says he would fund the package from a mixture of the £32billion fiscal headroom forecast to be available by 2024-25, and an efficiency savings programme that would see 1 per cent cut from all Whitehall spending, including on the NHS. Such an approach would represent a monumental break from the Government’s insistence, under Boris Johnson and Mr Sunak, that Britain cannot afford tax cuts and could face greater inflation if such measures were introduced.
He is preparing to produce a “scorecard” setting out his sums, in a bid to put pressure on candidates making unfunded pledges.
“Whether it’s cost of living or it’s low levels of growth, for me, that’s our most immediate challenge,” he says. “You need someone with an economic plan from day one.”
Mr Javid says his economic plan would have two key planks – shortterm measures to help people “with immediate cost of living challenges” and “a longer term plan for tax reform”.
Short-term measures would include a fresh package of support worth up to £5billion to help with the cost of energy bills. Plus, he adds: “I have in mind a further significant cut in fuel duty – temporary, short term. Because I think that is one of the biggest costs that people face in businesses as well.”
But, Mr Javid continues: “The Government can’t prevent the impact of high price rises on everyone. You can’t mitigate everything.
“The long way out of this, the better way, is to turbo growth. I’ve always believed in free markets, in low taxation, in light regulation, as the conditions necessary for growth.
“It was true 20 to 30 years ago, it was true under Margaret Thatcher, and it’s true now, because it’s how economies grow and how they work.”
Current levels of taxation, says Mr Javid, are “seriously inhibiting growth. And if you don’t do something about that now, really quickly, then you will find that you’re stuck at a very low growth rate, and that you won’t be able to meet the demands of what British people expect from public services ... and it will really hit living standards long-term”.
In a barely disguised attack on Mr Sunak, he adds: “Our tax rate now is already almost a 70-year high – and that’s happened under the Conservatives. I think that troubles a lot of people. And so I think a prerequisite for growth is tax cuts.
“There are some that say that you can’t have tax cuts until you’ve got growth. I think that’s wrong. I think that is fundamentally flawed analysis. I think you can’t have growth until you’ve got the tax cuts.” So far Mr Javid has ignored the elephant in the room: the National Insurance hike, or health and social care levy, introduced by Mr Sunak and publicly backed by the then health secretary as a way of pouring money into an NHS struggling to cope with Covid backlogs.
Turning to his plans for longer-term tax changes, he says: “I would scrap the health and social care levy.”
“That’s a 1.25 per cent levy on incomes and it’s something that I think is not necessary. I don’t think we need it anymore. And I think it complicates the tax system.”
Asked to explain his extraordinary change of heart since advocating the move since September last year, Mr Javid says: “At the time I was the health secretary, I wasn’t the chancellor. It wasn’t my job to work out exactly how to pay for that. It was my job to set out what the health and social care reforms are going to require, and make sure that cost is the lowest it can possibly be for what we want to deliver. When the Treasury came back with how they wanted to fund it, I understood that. I’m not sure I would have done it if I had been chancellor but I was focused on my job and I’m not trying to do other people’s jobs for them.”
How would Mr Javid have funded the additional £12billion per year for health and social care?
“That headroom that we’re getting from existing taxes, without having new taxes, was enough,” he says. “I would have earmarked the revenue we were projected to get from existing taxes for the priority of health and social care.”
Mr Javid’s plans also include bringing forward the planned 1p cut in income tax from 2024-25, lowering the basic rate from 20p to 19p from next year “to help with growth, to help people with their incomes”.
He would also ditch the planned increase in corporation tax from 19 per cent to 25 per cent from next year, announcing the move immediately in order to end speculation about the proposals that he warns is “stalling business investment and is causing international business to think again about Britain”.
Mr Javid would go further, returning to George Osborne’s policy of reducing corporation tax each year, saying: “I thought it was a great policy. It sends a really strong signal to businesses about post-Brexit Britain and the kind of country we want to be. We should be lowering taxes, not increasing taxes.”
Mr Javid, who voted for Remain in the 2016 referendum but has since declared himself fully converted to the Brexit cause, says that since Brexit, under Mr Johnson’s government, “we’ve actually become more European, rather than less European” – citing the size of the state and level of intervention in people’s lives.
“I would set a glide path again, to get corporation tax down to 15 per cent,” he says. That would be the lowest corporation tax in the G20. “I think it would be a clarion call to businesses across the world about the kind of country that we want to be and how we will generate wealth.”
Mr Javid points to his decision to fold quangos such as Health Education England into the NHS as an example of how Whitehall could deliver the cost savings needed to fund the entirety of his plan. The “static cost” of his tax plans would be £39billion, he says, but in reality “it will be a lot less” due to additional revenue that would be raised by drawing more investment to Britain. “When George Osborne first started cutting corporation tax, revenue actually went up year after year. It didn’t go down.”
Warming to his theme about taking advantage of post-Brexit freedoms, Mr Javid says he would introduce a five-year “sunset” rule on so-called “retained EU law” that still forms part of the UK statute book after Brexit.
“In my old department, probably over half the rules and regulations that were followed were EU rules. That doesn’t mean that if I look at individual rules that they’re wrong in any way, but some of them are absolutely unnecessary or they’re not what Britain needs and they’re certainly not pro-growth and pro-competition.
“I’d say to every department that all your retained EU law, you must review it. You must decide what it is that you are going to keep.
“And if you’re going to keep it or reform it, you’ve got to have a good reason, and that reason has to take into account growth.” Mr Javid says he wrestled with his conscience in recent months over allegations of sleaze and Covid-rule breaking at the heart of government, but insists he “wasn’t thinking about what happens if the Prime Minister goes and I wasn’t thinking about the leadership, in fact, it was far from my mind”.
Last weekend, however, as it emerged that Mr Johnson had misled the country about what he knew of
‘Whether it’s cost of living or it’s low levels of growth, for me, that’s our most immediate challenge’
‘Promises have been broken, for example the increase in National Insurance. People feel that we lost our way’
allegations against Chris Pincher, his deputy chief whip, Mr Javid reached his tipping point.
“Last weekend was when I first started thinking that maybe I just don’t have confidence anymore in the Prime Minister,” he says.
“Even then, on Sunday, I hadn’t quite decided to resign. I was thinking maybe I just owe the Prime Minister, one more time, the benefit of doubt.”
On Tuesday morning, as the full scale of Mr Johnson’s prior knowledge of claims against Mr Pincher became apparent, Mr Javid joined MPs including the Prime Minister at a parliamentary prayer breakfast.
“There was a pastor there, Reverend Isaac, and I just felt I was just really listening intently to what he was saying,” says Mr Javid. “And I know it sounds strange, but it made me reflect.
“I made my decision then, sitting there listening to his sermon, and I just thought it’s about integrity, it’s about a duty. If you haven’t got confidence in the boss, you owe it to yourself and the country to tell the boss nicely that you can’t serve and that was it.”
Mr Javid wrote his resignation letter and asked to see the Prime Minister.
Mr Johnson agreed to a meeting immediately, knowing what was about to take place.
“I spent around 40 minutes with him,” says Mr Javid, setting out how Mr Johnson urged him to stay. “I said: ‘Look, ultimately, I don’t have confidence anymore. And therefore I think it would be wrong for me to serve because I’m not one of these people that pretends to have confidence and then does other things ... preparing for leadership bids and stuff in the background.”
Mr Javid then published his resignation letter on Twitter, with Mr Sunak issuing his own only minutes later. The pair had not co-ordinated their resignations and only spoke several hours later, Mr Javid says.
“I heard weeks ago that he’d been thinking about resigning when he got fined. But obviously nothing happened that time. Then all of a sudden, about 10 minutes or so after my resignation, I saw his resignation letter, which surprised me. It surprised my team. I mean, it really took me aback. “I thought, wow, that was quick.” Now Mr Javid insists he has the integrity and proven capabilities to take over from Mr Johnson. “I am going to put myself forward to be leader of Conservative Party and Prime Minister of our great country. I think that over the last couple of years, we’ve lost our way a bit, trying to do a bit of this, a bit of that. And people perhaps feel we don’t know what Conservatives will actually do for us.
“Promises have been broken, for example, the increase in National Insurance. People feel that we lost our way and I want to restore purpose.”