Boris Johnson clashes with Tom Newton Dunn on cost of living
The Treasury collected a record £718.2billion, up by 23 percent in just 12 months. Boris Johnson on Tuesday lambasted poorly performing state-funded agencies – threatening to privatise them. The Prime Minister is now under mounting pressure to ease the burden on hard-pressed families after the Treasury clawed in record levels of taxes.
Income tax, National Insurance and capital gains hit a combined record high of £395billion. The record tax take comes at a time of major strains on public services.
Chancellor Rishi Sunak pushed ahead with a £12billion a year 1.25 percent hike in National Insurance this month to help clear Covid backlogs in the NHS.
But the problems are likely to continue for years.
Supply issues have left many women going through the menopause without access to hormone-replacement therapy. Pharmacies are also reporting problems sourcing other drugs on a daily basis. A range of other state-funded services are also creaking following the pandemic.
Delays in the Passport Office are so bad that Mr Johnson has threatened to privatise it.
The Driver and Vehicle Licensing Agency has also been put on notice.
In his Spring Statement, the Chancellor promised the biggest cut to personal taxes in a quarter of a century under a plan to reform the system by 2024.
But campaigners have said it is time to end the “stealth tax” on income caused by a threshold freeze that came into force this month.
Danielle Boxall, media campaign manager at the TaxPayers’ Alliance, said: “It’s no surprise the tax take has reached a record high.
Boris Johnson lambasted poorly performing state-funded agencies – threatening to privatise them
“With inflation rising, the Chancellor’s tax break freeze is effectively a stealth tax on unsuspecting taxpayers already facing the highest tax burden in 70 years.
“The Treasury should link thresholds with inflation or wage growth to avoid fiscal drag and give taxpayers and businesses some much-needed respite.”
In March 2021, Mr Sunak announced that income tax thresholds would be frozen from April this year until 2026.
It means more people will be dragged into paying the basic rate of tax as the trigger remains at £12,570 for the next four years.
The higher rate threshold will remain at £50,270 for the same period, tipping more earners into the high level.
But the Chancellor set out plans last month to reduce the basic rate of income tax by one percent to 19 percent from April 2024 – the first cut in 16 years. Treasury insiders said the Government’s tax plan will reduce and reform taxes to help families with the cost of living, create the conditions for private sector-led growth and ensure the proceeds of growth are shared fairly.
Overall, tax receipts as a proportion of GDP hit more than 30 percent after hovering at around 27 percent over the previous two decades, according to the provisional HMRC figures.
Inheritance tax receipts increased by £6.1billion in the last tax year, which officials said was likely down to the pandemic and recent rises in asset values.
The strong tax take will give the Chancellor more room to act to tackle the cost-of-living crisis in his Autumn Budget.
James Smith, research director at the Resolution Foundation, said the record levels meant the Chancellor “can have little reason not to provide much-needed policy support to families as they deal with the higher inflation and energy bills that are now hitting their finances”.
Mr Sunak insisted he is focused on securing the economic recovery in the wake of the pandemic while acting to ease the pressures families are facing as inflation pushes up everyday costs.
He said: “Thanks to the action we’ve taken, the economy is recovering and our public finances are improving, allowing us to invest in vital public services, help the hardest hit with a £22billion package of support and get people into work. Despite global economic headwinds, we continue to meet our fiscal rules, showing our commitment to keeping the public finances sustainable while supporting the UK’s long-term growth and addressing the immediate pressures facing people with their cost of living.”
Separate figures released on Tuesday showed Government borrowing dropped by half but still remained close to an all-time high as the fragile recovery continues.
The Government borrowed £151.8billion in the year to March, the third highest amount since 1947.
But the figure is still less than half the £317.6billion borrowed in the previous 12 months, according to the Office for National Statistics.
MoT plan ‘worse for drivers’
Another money-saving idea floated at the Cabinet meeting was to change motoring laws to make MoT tests, which cost £55, necessary every two years rather than annually.
But Jack Cousens, head of roads policy at the AA, said: “Though well intended, the move could make costs worse for drivers with higher repair bills, make our roads more dangerous and would put jobs in the garage industry at risk.”
Voters don’t want to talk about ‘Partygate’, says Johnson
The Prime Minister insists voters believe the “partygate” row has been “dealt with” and want him to get on with tackling issues facing the country, writes Macer Hall, Political Editor.
Boris Johnson brushed aside questions about Downing Street’s Covid rule-breaking and resulting fines. He said: “Increasingly, people can see this is something that is being dealt with. And what they want us to focus on is the other stuff, and particularly the big stuff that really matters to them.”
In last night’s TalkTV interview, the PM added: “Let me just remind you of my golden rule, which is that as a politician, certainly as Prime Minister, you’re better off talking about the things that people want you to do.”
Childcare tops PM’s list to help families
The Prime Minister is poised to announce new measures to drive down the cost of childcare, food and other essentials. Downing Street said Boris Johnson held a “productive” discussion with his Cabinet about providing extra help as households struggle with the cost-of-living squeeze. Proposals included using the UK’s Brexit freedom to slash import tariffs on a range of consumer goods.
Childcare is said to be a top priority, following reports average fees have risen by £1,500 over the last two years.
It is understood Mr Johnson favours reducing legal minimum limits for adult supervision of children. The Prime Minister’s domestic and economic strategy committee will study ideas before the State Opening of Parliament on May 10.
Whitehall insiders say ministers are ordered to come up with “innovative” proposals that can be put in place rapidly, without increasing spending. Measures are likely to focus on freeing up markets to drive down consumer costs. Several Cabinet ministers were reported to have voiced concerns about the impact of recent Treasury tax rises on households during Tuesday’s meeting.
Mr Johnson’s spokesman said: “The Prime Minister said that whilst our recovery from the global pandemic was faster than anybody previously expected, continued disruptions in the global economy, coupled with Putin’s continued crazed malevolence in Ukraine, meant the public was facing real pressures. The Government would continue to be on their side.
“He said there was more to do, including in areas like childcare, to further ease pressures for those that need it most and to get even more people into high skilled, high-wage jobs.”
Our economy is bouncing back from the impact of Covid, with Government borrowing having more than halved in the 2021-22 financial year.
Emergency pandemic measures came at a cost, but the strength of our economy meant we had the fastest growth in the G7 last year, with unemployment dropping below pre-pandemic levels.
Now we must stick to a sustainable approach to our country’s finances, without burdening the next generation with ever-increasing debt.
We are taking action to help people with the cost of living – spending £22billion this financial year to shield people from bill rises, cut fuel duty as well as National Insurance contributions, and double the Household Support Fund available to £1billion.
In the longer term, growth is essential to support living standards and protect the public finances – but this financial year alone, we’re forecast to spend £83billion on interest on our debt, more than the schools, Home Office and Ministry of Justice budgets combined.
So it’s right that we’re protecting public finances – and it is my personal mission to make sure that hard-earned taxpayers’ money is not wasted by Whitehall.
I’ve joined with colleagues across Government to form a new Efficiencies and Value for Money committee.
I will be relentless in ensuring efficient public spending, responsibility over our debt and a commitment to lowering taxes.