Johnson urges tax cuts following near exit
Boris Johnson said the U.K. needs tax cuts “sooner rather than later,” a clear nod to the demands of rebels in his ruling Conservative Party who came close to ousting the British prime minister this week.
In his first speech since he emerged from Monday’s confidence vote severely weakened but still in charge, Johnson tried to hit the reset button for his government by saying it was time to move on from what he called a pandemic-era mindset that “the answer to every problem is more state spending.”
“It is time for the government to stop spending, and to start cutting taxes and cutting regulation,” he said in Blackpool, northern England, on Thursday. “When you face inflationary pressure, you can’t just spend your way out of it.”
Johnson faces a major challenge to win over his members of Parliament after 41% of them voted against him. With the U.K.’s tax burden on track to be the highest since the 1950s, many lawmakers in his ruling Conservative Party have complained that the high level of government spending is out of line with
the party’s low-tax ideology and is helping drive the cost of living crisis.
Addressing Tory MPs in an attempt to save his premiership on Monday, Johnson had promised a return to more traditional Tory values. On Thursday he deliberately echoed some of the signature positions of the “Iron Lady,” 1980s Tory premier Margaret Thatcher. “The best way the government can help is to simply get out of the way,” Johnson said.
Johnson said the U.K. economy is “steering into the wind” due to the after-effects of the covid-19 pandemic and Russia’s war in Ukraine, and warned that the recovery is “not going to be quick or easy.”
But he also sought to spell out ways his government could help reduce the costs faced by ordinary Britons. The centerpiece of his speech was a plan to enable more Britons to buy their own homes, via an extension of “right to buy” — a totemic policy of Thatcher’s government — to people renting social homes owned by housing associations.
It is far from clear if Johnson can deliver on his housing promises. The “right to buy” extension has foundered several times before under Johnson’s predecessors, in part because the government does not own the properties and the Treasury has balked at the costs.
The promise to cut taxes also risks a row with the Treasury, given Tory rebels understand the aim to be a reduction in income tax to help households through the cost of living crisis. In a speech to the Onward think tank this week, though, Chancellor of the Exchequer Rishi Sunak made clear he is looking at reducing levies on business in his next budget in the fall, in order to incentivize investment.
That would be unlikely to assuage the Tory opposition, and much is therefore riding on a joint Johnson-Sunak speech the prime minister’s office has touted for the coming weeks.
In his speech, Johnson spoke of the risk of wage rises fueling inflation, setting up a likely battle with labor unions this summer over pay.
The RMT union said it plans to lead a three-day strike of 50,000 rail workers this month. Trade Unions Congress Deputy General Secretary Paul Nowak questioned the prime minister’s warning of a wage-price spiral, blaming inflation on energy prices rather than wage rises.
“The only way to give families long-term financial security is to get pay rising across the economy,” Nowak said in a statement. “British workers are suffering the longest wage squeeze in more than 200 years. They urgently need more money in their pockets.”
But after Monday’s confidence vote laid bare the depth of opposition against Johnson in his party, he faces pressure to return the party to its small-government philosophy.
Though the options available to those in his party who opposed him are more complicated after failing to oust the premier, his position remains precarious and ensuring the party remains governable is likely to require a constant assessment of which policies to push through and which to ditch.