PM is repeating John Major’s mistakes

It beggars belief that the Tories remain committed to raising National Insurance Contributions (NICs) in April. It would be a calamitous mistake which will become a lightning rod for all that has gone wrong with Boris Johnson’s administration, and, given the flagrant breach of a manifesto promise, could help cost them the next general election.

This is hardly the Government’s only tax increase, of course: they are also increasing corporation tax from 19 per cent to 25 per cent in 2023 and are pushing through myriad stealth grabs by freezing thresholds at a time of elevated inflation. A study by Beacon Economic Forecasting for the Politeia think-tank finds that higher taxes will increase unemployment, slow GDP growth, hike inflation, damage the pound and, in particular, reduce private sector spending. No wonder that according to one poll, Labour is now 10 points ahead of the Tories when it comes to trust on tax. The Conservatives might regard themselves as the natural low tax party, but the public does not.

Both elements of the NIC tax raid need to be scrapped permanently, not merely delayed and not only the part directly targeting workers; the raid on firms will lead to lower pay rises and encourage automation, hurting employees just as badly. The good news is that the economy is recovering faster than expected, and the budget deficit won’t be as bad as previously feared. But that isn’t an argument for fiscal laxity: the reversal of the NIC increases needs to be accompanied by £10bn in spending cuts. Boris Johnson should rehire Lord Agnew (or somebody of his stature) and empower them to wage a war on waste, identifying useless programmes to be axed.

For a party that supposedly respects history, it is shocking just how little the Conservatives remember about the past, and how few lessons they learn from it. In 1992, John Major won a surprise re-election campaign after pledging tax cuts and lower public spending as a share of national income (those were the days). His warnings of a Labour “tax bombshell” were especially effective. In 1993, however, the government chose to raise taxes – something that Labour cleverly hung around their necks in the 1997 election.

Outrage was widespread at a hike in the VAT on domestic fuel from zero (as on food and children’s clothes) to 8 per cent, the Chancellor claiming that his overall package was prudent and environmentally friendly (history does repeat itself pitilessly). The goal was to hit 17.5 per cent, but a handful of MPs rebelled in December 1994 and helped defeat the plan.

Labour used the VAT hike to paint the Tories as callous and duplicitous. The Conservatives’ one trump card was Sir John’s reputation for honesty: Labour unveiled an ad that portrayed him with two faces, one pointing towards tax cuts and the other towards 22 tax increases. Labour won a landslide pledging to reduce the 8 per cent figure to 5 per cent, the lowest the EU would allow.

This is why Boris Johnson must now also cut VAT on fuel: rage at this particular policy was always part of the Eurosceptic argument, and it is baffling that the Tories have even forgotten the totemic nature of this dispute in recent British political history. Sir John’s rupture with the ThatcherHowe-Lawson lower tax consensus paved the way for Tony Blair’s victory, just as when George HW Bush reneged on his famous 1988 pledge of “read my lips... no new taxes”, he undermined the moral certainty of the Reagan revolution that had been based upon lower and simpler taxes.

A complete and utter about-turn on tax is a necessary, though not sufficient, condition for any Tory recovery after Partygate.