Spring Statement: Tory grab laid bare as income tax and national insurance pain set to begin: Ian McConnell

More insidiously, the whole Brexit campaign revolved around populism, with wealthy Tory Brexiters railing against “elites”. The “elites” tended to be those who could see what Brexit would bring, dared to speak the truth, and have been proved right. Mr Johnson was obviously at the centre of this Brexit drive. And he won a big majority in the December 2019 election on the back of his “Get Brexit Done” mantra.

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However, while many seem to have been taken in by the smiles and laughter of Messrs Johnson and Sunak, the fact is that ordinary households are paying the price for Brexit in terms of the economic drag and effect on living standards and will continue to do so for years and decades. They are also facing an utterly grim cost-of-living crisis. And they are facing a huge hike in their taxes, the scale of which was laid out starkly in a report published last week by the Institute for Fiscal Studies.

There has been much speculation that Mr Sunak will cut income tax in time for the next general election. It remains to be seen what happens on this front but such a move would be entirely in keeping with the behaviour of this UK Government, providing a premise for a tale of how it is helping the British people ahead of polling day.

However, what is far more interesting than a potential pre-election tax cut is the scale of the rises already in train. There has been a huge tax grab by the Johnson administration but it seems that many people have not really noticed. And, of course, the national insurance hike which comes into effect next month was dressed up when it was announced by Mr Johnson last September as a “health and social care levy”. Money for health and social care did not have to come from national insurance. The rise in national insurance is just a huge increase in tax, pure and simple.

The tax burden is also being increased dramatically by a freeze in income tax thresholds. Even at times of relatively low inflation, when cost-of-living-related pay increases are modest, such a standstill in thresholds can amount to a large tax increase. And, in grim days such as these with annual UK consumer prices index inflation already at its highest in around three decades and tipped to peak at more than eight per cent, the freezing of thresholds will see many people paying much more tax than if thresholds were increased in line with inflation. The freezing of thresholds does not generally grab the headlines in the way in which cuts in income tax rates – such as those which many expect to come from Mr Sunak before the next election – tend to do.

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However, the numbers for the increased tax take from frozen thresholds can be very big indeed. And they reach eye-watering proportions in the context of Mr Sunak’s four-year freeze.

The IFS noted this week: “When Mr Sunak announced a freeze in income tax thresholds in March 2021, he expected it to raise around £8 billion. Since then, inflation has been much higher, such that under the latest forecasts it could raise as much as £21 billion.”

It is worth observing that the £8bn a year figure was already a very big number.

The IFS bases its analysis of the tax moves of this Government, and its comparisons of these with the actions of previous administrations, on “what a chancellor intended when initially setting out policy”. In the context of Mr Sunak’s protracted threshold-freezing, this is therefore based on the original projections for the amount that would be raised from this, before the nasty upside inflation surprises.

Even with these original projections, the think-tank’s headline observation is that “Boris Johnson and Rishi Sunak have announced tax rises worth 2% of GDP (gross domestic product) in just two years – the same as Tony Blair and Gordon Brown did in ten”.

This will probably come as no great surprise to those switched on to the huge effect of a protracted freeze in income tax thresholds, a quiet but sure way of hiking the take, and those aware of the additional burden of the 1.25-percentage-point rise in national insurance contributions.

Mr Sunak has also announced significant rises in corporation tax. Unlike the national insurance move and the pernicious freezing of income tax thresholds, the rise in the corporation tax rate seems entirely sensible given the huge cuts in this previously. Business investment appeared to receive little or no boost from the Tories’ previous cutting of the main corporation tax rate from 28% in 2010 to 19%. Mr Sunak’s decision a year ago to raise corporation tax to 25% from 2023 looked like one of his better moves, given the increased rate will still be very competitive in a global context but will yield crucial revenue.

The IFS said last week: “The 2% of GDP increase in taxation that, under current plans, the UK will be facing by 2024/25 is large by historical standards.”

Flagging its comparison of the “total magnitude of permanent tax changes – i.e. excluding temporary tax cuts or rises – announced by each chancellor and prime minister to take office since 1970”, the think-tank added: “In only slightly more than two years, the current chancellor has announced tax rises of a similar scale to those seen under Gordon Brown’s chancellorship. Given that Mr Brown’s period in the Treasury stretched for almost a decade, the annual rate of increase in taxation announced under the current administration is substantially higher. Not since Margaret Thatcher – who enacted substantial tax cuts in the latter years of her premiership – has a prime minister announced policy changes that act to reduce, rather than increase, the overall tax burden.”

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The IFS noted, since Mr Sunak took office a bit more than two years ago, “his tax policy has been characterised by large temporary tax cuts – targeted primarily at providing immediate support to sectors hit hardest by the economic effects of the Covid-19 pandemic – coupled with even larger (and permanent) tax rises, backloaded to the final years of the parliament”.

It added: “If current plans are enacted, the scale of the tax increases will be large by historic standards. These will start this April with an increase in rates of national insurance contributions and a cash freeze in income tax thresholds, and be followed by an increase in corporation tax rates in April 2023. The overall impact will be to gradually ramp up the UK tax burden by an eventual 2% of GDP, according to the Treasury’s own scorecard – equivalent to around £46 billion in today’s money.”

The IFS cited as a caveat that “the tenures of the current occupants of Numbers 10 and 11 Downing Street are not yet over”.

And it added: “The coming years could yet see the announcement of tax reductions (or cancellations of planned increases) that would make the current administration seem less high-taxing.”

However, crucially, the think-tank observed that “it is extremely hard to imagine that plans could change by so much that taxes would be cut overall”.

Analysing the long-term picture, the IFS said: “While the scale of the tax rises announced by the current government is historically unusual, the direction of travel is not.”

It noted that “tax-raising governments have, over the last 30 years, become the norm”, and predicted a continuation of this trend given the need to support an ageing population.

The IFS said: “Tax rises since 2010 have in part been a response to a weakening of the public finances (in particular an increase in the structural deficit), caused initially by the financial crisis and more recently by the Covid-19 pandemic. Such pressures will likely be compounded by surging energy prices and the conflict in Ukraine. But governments have also faced an ageing population that demands both more, and more expensive, health and social care.”

It added: “If the Chancellor’s plans remain unchanged, next month will mark the beginning of a steep ascent in the path of UK taxation. It will come hand in hand with a spike in inflation, only fuelled further by the conflict in Ukraine. Not for nothing did T.S. Eliot call April the cruellest month.”

The IFS observed that, looking further ahead, “whether this government cuts taxes in the short run, or finds a way to cut some taxes before the next election, the longer-term direction of travel is clear”, declaring the Johnson administration will “not be the last to raise taxes in [the] face of the inexorable spending pressures of an ageing population”.

However, the UK Government can decide where it raises the taxes from, and in this regard the likes of the regressive national insurance rise is lamentable. Of course, big regressive tax moves are what the Tories have been all about since 2010 – just look at the value-added tax hike under David Cameron and George Osborne, who together put in place a savage austerity programme.

Many voters have seemed impressed for a long time now by the Tory Brexit and the wisecracking of Messrs Johnson and Sunak, who delivers his Spring Statement today, and have not been annoyed by what have seemed often like utterly patronising tones.

Front is one thing though, and reality is another.

And the Conservatives have, for more than a decade now, been no friends of the ordinary people when it comes to household finances.