AS U-turns go, it was the most dramatic to date. Which is saying something. Boris Johnson is now relying on “bazookering” the cost-of-living crisis with higher taxes and more spending.
That most fiscal of Conservatives Rishi Sunak couldn’t bring himself to describe the latest dizzying manoeuvre as a windfall tax but, rather, an “energy profit levy”.
Because, of course, it links the tax hike with an increased incentive to invest, thus cancelling out previous UK Government reservations and creating some clear blue water between itself and Labour. However, no one was fooled. If it looks like a windfall tax, etc. etc.
Indeed, the Chancellor is also considering extending the levy to cover the profits of electricity giants, which might pump another £4bn into the Treasury’s coffers.
Going forward, he has also pledged to increase state pensions and Universal Credit next year in line with inflation, which could well cost another £15bn.
The PM noted that the energy giants’ initial “lack of squeal” was significant but then they duly squealed, warning they would have to review their investment plans because the new tax was not a one-off but a “multi-year proposal”. It could run until December 2025.
Some Tory MPs supported the new levy but others, particularly those on the Right, were deeply troubled by Johnson’s about-turn, believing squeezing businesses with higher taxes to be “unConservative”. They are well aware how Britain’s tax burden is already at its highest since the troubled 1970s when the economy was gripped by stagflation.
Yet again, several Government ministers who have publicly decried slapping a 65% tax rate on the North Sea oil and gas industry, fearing it would harm future investment, have suffered the embarrassment of their leader’s predilection to reverse ferret.
Dominic Raab, the deputy PM, recently said introducing a windfall tax would be “disastrous” and Kwasi Kwarteng, the Business Secretary, warned it would “discourage investment,” claiming it was nonsensical to hit firms with an “arbitrary” levy.
Jacob Rees-Mogg, the Brexit Opportunities Minister, decried raiding the “honey pot of business,” noting: “All taxation ultimately falls on individuals. So, when you’re calling for a windfall tax, you’re saying you want to pay more tax.”
And, for good measure, Johnson himself back in February declared a windfall tax would be “totally ridiculous,” warning: “It would raise prices for consumers.”
For heaven’s sake, it was only last week that more than 300 Tory MPs were whipped into the lobbies to vote against, yes, a windfall tax.
One disgruntled backbench soul noted: “It’s made us all look like prats,” while a Cabinet minister complained: “The politics of this is just so bad. We voted against it, we marched the whole party up the hill and are now taking them back down again. It looks like we’re being dictated to by Labour.”
Cue Rachel Reeves, the Shadow Chancellor, who was positively salivating at the Commons dispatch box when she declared how it was now Labour, which was “winning the battle of ideas”. Boris looked as though he had swallowed a scorpion.
However, the overall package was broadly welcomed by most politicians and economists as it was “highly progressive,” largely targeted at helping the most vulnerable through what looks increasingly like another winter of discontent.
But even here some high Tories complained the Chancellor was “throwing red meat to the socialists” after Sunak boasted his spending plans were twice as generous as Labour’s and his sting on the energy industry would raise more than twice the Opposition’s plans.
“Vladimir Corbyn,” as Boris affectionately dubbed the former chief comrade, would be forgiven for having a nip of vodka and a puff on his Cuban cigar following the Chancellor’s £21 billion splurge, the bulk coming from extra borrowing and higher tax receipts. It was the sort of interventionism Labour chancellors were famous for.
Another fear on the Tory Right is that Sunak’s mini-Budget will stoke up the very thing he wants to cool down: inflation. Despite the Chancellor insisting his measures would have a “minimal” effect on the cost of living, a seemingly unconvinced Rees-Mogg admitted to having “concerns” about them.
Economists agreed, saying the Treasury splurge risked fuelling inflation with the prospect over the coming months of the Bank of England raising interest rates from 1% to 3%, loading more pain onto mortgage-holders this winter.
Post Gray, the trickle of MPs expressing their lack of confidence in Johnson is gaining a deal of momentum. The Treasury’s John Glen became the first serving minister to suggest Johnson could be in trouble, saying his boss was now in “yellow card territory”.
David Davis, the ex-Brexit Secretary, who has called for Boris to go, described how angst on the Tory benches was growing because nervous colleagues saw “their own seats disappearing”.
A feeling not helped by a poll, which suggested the outcome of the general election could result in the Conservatives losing all but three of the key 88 battleground seats they currently hold by a slim margin over Labour.
This Tory undercurrent of alarm will grow further if, as expected, the party loses the Wakefield and Tiverton by-elections on June 23.
Sir Robert Buckland, the former Justice Secretary, chose his words carefully when he told BBC Radio 4’s The Week in Westminster: “There’s no doubt if both those by-elections are heavy defeats, then that is a serious question about how the Government is performing and changes will have to be made.”
Yet despite all the blue-on-blue flak, the PM is convinced that the public not only like getting money poured into their bank accounts but also like seeing the energy fat-cats footing the bill to help lower their cripplingly high gas and electricity bills.
He thinks there are votes to be had here, especially in those pro-Brexit red wall seats in northern England; whoever claims the credit for the windfall tax.
So, Boris believes keeping these constituencies sweet with his “big bazooka” strategy, worth £1,200 to 8m UK households, could be the difference between winning the next general election and losing it
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