Boris Johnson and Rishi Sunak have vowed to keep taxes low, in a coordinated attempt to calm mutinous Conservative MPs angered and unsettled by the government’s handling of the coronavirus crisis.
In a series of briefings with so-called “red wall” Tories, the prime minister and the chancellor sought to play down suggestions that the autumn budget would include extensive tax increases to reduce the budget deficit.
But they also said the government must be “honest” about tough choices ahead, and hinted that future tax rises could not be ruled out.
Speaking at a private meeting with Tory MPs newly elected last year, many of whom won seats in Labour heartlands on the promise of public investment, Sunak stressed a belief in a “dynamic low-tax economy” – a phrase probably designed to counters rumours that the Treasury is planning significant hikes in corporation tax, fuel duty, capital gains tax or self-employed national insurance contributions, all likely to be opposed by different wings of the party.
Sunak, who was earlier photographed leaving Downing Street carrying his preparatory notes, told MPs there would not be “a horror show of tax rises with no end in sight”. However, he warned the Treasury would “need to do some difficult things … but I promise you, if we trust one another we will be able to overcome the short-term challenges”.
Johnson made a tacit acknowledgement of the number of the government’s U-turns, which have angered so many MPs over the summer, on issues from A-level grading to local lockdowns and masks.
One MP summing up the mood said:“Everyone is very grumpy coming back, it feels like there is no coherent strategy, and this a charm offensive to win back some morale.”
Johnson told MPs they were likely to face a challenging winter. “I know it’s been tough,” he said. “I’ve got to warn you going it’s about to get tougher. The waters are about to get choppier. But we are going to deal with it.”
He stressed the importance of the “red wall” intake in his speech to the new MPs, saying the government would prioritise the needs of their voters – a move that could alarm some traditional Tories.
“We owe you, the country owes you, and above all we owe your constituents. We are going to deliver for your constituents in what they continue to call the red wall, but it’s the blue wall,” he said.
The government has borrowed £150bn in the first four months of the 2020-21 financial year and is on course to borrow more than £300bn by the year’s end. The Treasury is braced for the phasing out of its furlough scheme by the end of October to lead to higher unemployment, and Whitehall sources said the chancellor’s immediate focus was on a £2bn jobs package to help unemployed 16- to 24-year-olds into work.
One source said the chancellor’s message was a mixture of reassurance and tough love. “Down the line they will need to make sure the public finances are in good shape, but that’s not today’s issue,” the source said.
With the national debt rising above £2tn for the first time, Sunak told MPs that the spending would eventually have to stop. He said the party had to retain its reputation for fiscal credibility after a splurge of spending to keep the economy afloat during the pandemic, and said the government had to show the public how it planned to “correct our public finances”.
Sunak stressed economic competence was the party’s key advantage over Labour, a nod to how the party has been losing ground to Keir Starmer’s party in the polls. He told the MPs, many of whom have slim majorities in the traditionally Labour areas, that there would be a clear difference on tax between the Conservatives and Labour.
“We cannot, will not and must not surrender our position as the party of economic competence and sound finance. If we argue instead that there is no limit to what we can spend, that we can simply borrow our way out of any hole, then what is the difference between us and Labour?” he said.
Earlier Thérèse Coffey became the first cabinet minister to publicly warn against a move towards higher taxes. The work and pensions secretary said that while she would not comment directly on Treasury plans, reductions in tax would be more likely to bring in an increased amount of money.
“In the past, when some people might assume the only way to get tax up is to increase tax rates, actually we have shown in our economic history the opposite,” she told Times Radio.
The budget poses a challenge for Sunak to please both sides of the new-look Conservative party after the last election. New-intake Tories from northern England have made clear their opposition to tax rises seen to hit working families, including any rise in fuel duty or in national insurance contributions for the self-employed.
Shire Tories have made their feelings clear on any potential increase to capital gains tax, which they believe will alienate middle-income voters. “That is just absolutely toxic for us, I’ve already had emails saying ‘don’t you dare’,” one frontbencher said.
A government source said there would be “increasing engagement” with MPs as more returned to Westminster – a tacit acknowledgment that the government has spent a significant amount of its political capital over the summer, leading to vociferous public criticism from some senior Tories including Charles Walker, the vice-chair of the 1922 Committee of backbenchers, and Sir Bernard Jenkin, chair of the liaison committee.
During a sometimes bruising prime minister’s questions for Johnson on Wednesday he was reprimanded by the Speaker, Lindsay Hoyle, for repeatedly ignoring questions from Keir Starmer and for refusing to apologise for accusing the Labour leader of complicity in tolerance for the IRA.
The row erupted after Johnson evaded one question by instead referring to Starmer’s tenure as shadow Brexit secretary under Jeremy Corbyn, saying he was “a leader of the opposition who supported an IRA-condoning politician”.
A clearly angry Starmer pointed to his work combating Northern Ireland terrorism as the director of public prosecutions and demanded Johnson “do the decent thing” and withdraw the comment, which the prime minister refused to do.
Johnson’s performance seemed to rile some Conservative MPs. Huw Merriman, the chair of the transport select committee, said the prime minister needed to “mug up” when facing Starmer. “The theatrical approach just doesn’t work,” he told Sky News.
The PM later addressed his first post-recess gathering of the 1922 Committee, with around 50 or so MPs gathering in a committee room despite signs outside giving a socially distanced capacity of 29.
While No 10 had in billed the PM’s appearance in advance as “a pop-in”, he spoke for almost 15 minutes, described by one MP as “less a barnstorming performance than a fairly standard rallying speech”, much of which he had delivered earlier to the 2019 intake of Tories, something the PM joked about.
At the meeting, Johnson also called for a return to workplaces, saying this was key to any economic recovery. “An ounce of confidence is worth a tonne of Rishi’s money,” he said, adding that he hoped for a return to near normality by Christmas.
The prime minister then dashed out after just one question, saying he had to make his audience with the Queen.
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