UNTORY? NO, EVEN MAGGIE WOULD HAVE SUPPORTED THIS STEP

IN common with many fellow Conservative politicians, my telephone line has been rather busy in the last 48 hours. Among the callers are former or current colleagues, anxious to discuss – criticise might be a better word – the 1.25 per cent levy on National Insurance and dividends announced by the Prime Minister this week to fund his plans to reform social care and deal with the NHS Covid backlog.

Many are aghast. The Government may have won the vote in the House of Commons but there is widespread concern.

After all, a Conservative tax hike – and one that goes against a promise made in the most recent election manifesto to boot – is, on paper, a hard sell for Tory MPs.

So much so that some excitable commentators have even labelled this the ‘death knell for Conservatism’.

Well, it’s certainly true that under ordinary circumstances a decision to raise taxes in this way – which will leave Britain with the highest sustained tax burden since the war – would be unthinkable for anyone leading a party that has traditionally stood for low taxation.

Given the events of the last 18 months, however, I do not need to point out that these are very far from ordinary times.

Quite the opposite. The demands of the global pandemic, together with the NHS backlog and the long-brewing crisis in social care, has left the country in a very difficult financial situation.

Dealing with the pandemic has seen spending rising to astonishing levels of GDP, again unequalled since the war, while borrowing too is at unprecedented levels.

In short, extraordinary times call for difficult decisions – and it is just such a decision that has been taken by Boris Johnson.

Indeed, I believe that it is one that as radical a prime minister as Margaret Thatcher would in the end have supported. She used to say that sound finance and cutting borrowing came first – before tax cuts.

Make no mistake, as a lifelong Conservative, I believe the object of government is to keep taxes as low as possible and that money is most efficiently spent and most productively used when it is in the hands of the citizen and not the Government.

But I also know from personal experience that you can’t always get what you want – and that sometimes you have to make unpalatable choices.

WHEN I was Chancellor in 1993, I had to put up taxes against a backdrop of very high borrowing (albeit much lower than today’s level). Needless to say, it provoked much criticism – and still does.

Nonetheless, it worked: The economy stabilised, and it ushered in a very long period of economic growth.

Nor was my action unprecedented. In 1981, one of my predecessors as Chancellor, Geoffrey Howe, reduced marginal rates of income tax but also increased VAT and froze tax thresholds and personal allowances – increasing the personal burden of tax.

Again, this was designed to get the deficit and borrowing down. Those targets had to come first.

Of course, we are now in a different era, one of historically low interest rates, and slightly different rules apply.

Yet we cannot be certain this will remain the case for ever – and if it does not the consequences could be severe.

Given the amount of government borrowing, even a marginal increase in the interest rate could affect the amount the Government spends on interest very significantly. Moreover, whilst borrowing should be reduced gradually to pay for the pandemic there has to be a limit.

Couple this with the crisis the country has faced in recent months, and it is little wonder that we find ourselves in uncharted waters.

I think people of all political persuasions recognise the Government did the right thing when it set up the national furlough scheme and gave cash injections to companies to help them ride out the unprecedented downturn caused by Covid.

Nonetheless, at the same time they were worried about where the money came from and how we would pay it back.

But there seems to be a degree of astonishment abroad that there is a price to be paid and we must start paying it as soon as possible. Do some people really think all the measures of the last 18 months came free?

The pandemic also highlighted again the long-standing challenges facing our social care sector, a crisis admirably underlined in recent years by the Mail’s campaigning. That, together with the NHS, needs huge injections of cash.

Where do those critics of the Prime Minister suggest that the money comes from? More borrowing? A cut in spending? The latter would be extremely difficult given the scale and number of patient backlogs.

This has not stopped the Labour Party crying foul, arguing that this move is little more than a cynical attempt to protect wealthy Tory voters from having to sell their homes to pay for care when in reality those of modest means stand to gain just as much: Under the current, means-tested system, you are not entitled to help with the cost of care from your local council if you have assets of more than £23,250.

Then again what else can they say? The Labour leader Keir Starmer found himself in an invidious position: Voting against the proposals was a vote against more money to the NHS – not to mention against Labour’s own manifesto, which is usually robust in its support of wider taxation. It’s one reason why I think he has made a mistake in not backing the Government.

Let me be clear: I am not an unqualified cheerleader for what Boris unveiled on Tuesday. I would have preferred not to apply the increase to National Insurance, and I’m sceptical about whether the revenue raised can be properly ringfenced in the way the Government has claimed.

It is vital the money does not vanish into a vast black hole, but is clearly designated to improve the social care system.

While I think a rise in income tax would have been a simpler proposition, that undoubtedly would have been met with the same howls of outrage, while the only other valid alternative lies in some kind of social care insurance which, while entirely possible in the longer term, brings its own complications.

CERTAINLY, insurance companies in this country have made clear that they do not feel it is a scheme they could operate effectively. The alternative remains a nationalised insurance company scheme, but that it could be years in the making.

It’s why I believe the Government, placed in an uncomfortable position with no ideal outcome, had no alternative but to take the draconian measures announced this week.

Yes, the measures strike a line through the words in its own manifesto – but, then again, as the Prime Minister has said, that same manifesto did not foresee a global pandemic and the attendant catastrophic consequences for the national finances.

The Government has had to spend an extraordinary and alarming amount of money. It has to be repaid somehow and I believe that the British public are mature enough to recognise that harsh truth and accept it. The poll in today’s Mail suggests they are.