Boris Johnson’s victory in the Conservative leadership election could lead to a flurry of tax changes when MPs return to the Commons in the autumn. The former Mayor of London – sometimes referred to in the media as ‘Bo Jo’ – won the contest with a promise to both cut taxes and increase spending on schools and the police. However, his most significant pledge is that Britain will leave the EU on 31 October 2019, in a ‘no deal’ scenario if necessary.
What Boris Johnson said during the leadership contest:
- Raise the threshold for the higher rate of income tax to £80,000 (rather than the current £50,000). Johnson said this would reverse the effects of ‘fiscal drag’, which has brought more people into the higher rate tax bracket over time.
- Align gradually the income tax and national insurance contribution threshold, increasing the NI threshold from £8,632 to £12,500.
- There is speculation Johnson will consider cutting stamp duty on home purchases — a policy favoured by Liz Truss, now International Trade Secretary. This may be abolishing stamp duty on homes worth less than £500,000.
- Called generally for cuts in corporation tax (has not given a figure) and business rates.
- Argued for raising the threshold for the annual investment allowance significantly above the present level of £1 million to promote business.
- Examine whether levies on foods high in salt, fat and sugar are effective, and has vowed not to introduce any new ones until the review is complete.
- Create tax-free zones in ports - where goods can be landed in the UK but not be subject to any duties. This was part of his vision for the country after Britain leaves in October, particularly in Northern Ireland.
- The 2019 loan charge “seems superficially unjust and… definitely needs a proper, independent review”
- Raise the national living wage.
- Reduce the national debt as a proportion of gross domestic product.
The Institute for Fiscal Studies has estimated that Boris Johnson’s tax pledges will potentially cost the Treasury billions of pounds. In response to these criticisms, Boris Johnson claimed that there is ‘headroom available’ for increased spending and that tax cuts will stimulate economic growth.
Johnson gave his view on taxing digital services to a York hustings, saying: “I think it’s deeply unfair that high street businesses are paying tax through the nose... whereas the internet giants, the FAANGs — Facebook, Amazon, Netflix and Google — are paying virtually nothing”. He added: “We’ve got to find a way of taxing the internet giants on their income, because at the moment it is simply unfair.”
In the BBC’s Leadership debate, Johnson said he would lift the National Insurance threshold for the low-paid but downgraded (in many observers’ eyes) his proposal on the higher rate threshold to an ‘ambition’ that was ‘open to debate’.
In his first speech as Prime Minister, he said he is ‘convinced that we can do a deal without checks at the Irish border, because we refuse under any circumstances to have such checks and yet without that anti-democratic backstop’. Johnson said free ports will drive growth and thousands of high-skilled jobs in ‘left-behind’ areas and added ‘Let's change the tax rules to provide extra incentives to invest in capital and research’. He also spoke of his spending plans, which include 20,000 more police on the streets, 20 new hospital upgrades, fix the crisis in social care ‘once and for all’ and level up per pupil funding in primary and secondary schools. He did not mention tax in his victory speech earlier in the week.
Chancellor – Saj Javid
The new Chancellor is Sajid Javid, who also ran for Conservative leader. Before being elected MP, he worked in business and finance. Aged 25, he became a Vice President at Chase Manhattan Bank. He later moved to Deutsche Bank in London to help build its business in emerging market countries. Sajid left Deutsche Bank as a senior Managing Director in the summer of 2009 for a career in politics.
After his election to Parliament, he was promoted to the role of Economic Secretary to the Treasury, and later became Financial Secretary to the Treasury. He was first appointed to the Cabinet in 2014 as Secretary of State for Culture, Media and Sport by Prime Minister David Cameron. He went on to serve under Cameron and Theresa May as Business Secretary, Housing Secretary and Home Secretary, before his appointment as Chancellor of the Exchequer by Boris Johnson.
What Sajid Javid said during the leadership contest:
- His priority is to cut the basic rate of income tax but he is willing to scrap the 45p rate in a bid to inject more ‘dynamism’ into the economy
- Argued that income tax cuts can pay for themselves, highlighting increased tax revenues in the wake of George Osborne’s decision to scrap the 50 pence rate of income tax.
- Argued for freezing fuel duty for at least two more years.
One of Javid’s more controversial policy ideas came in September 2018 when he proposed to scrap auto-enrolment if there is no Brexit deal. Javid has talked of creating a £100 billion national infrastructure fund and investing heavily in house building,
Chief Secretary – Rishi Sunak
Rishi Sunak is the new Chief Secretary to the Treasury. Sunak was Parliamentary Under Secretary of State at the Ministry of Housing, Communities and Local Government from January 2018 to July 2019. Sunak spent his professional career before politics in business and finance, working internationally. He co-founded an investment firm working with companies in multiple geographies. He then used that experience to help small and entrepreneurial British companies grow.
Financial Secretary – Jesse Norman
Jesse Norman remains as Financial Secretary to the Treasury and has been made a privy councillor, entitling him to be called ‘Right Honourable’. Before entering politics Norman was a Director at Barclays, researched and taught philosophy at University College London, and ran a charitable project in Communist Eastern Europe.
Treasury Committee Chair - vacant
Following the appointment of the former Chair of the Treasury Committee, Nicky Morgan MP, as Secretary of State for Digital, Culture, Media and Sport, the Speaker has announced that there will be an election for the new Chair of the Committee. Nominations are likely to open shortly after the House returns in September, following an announcement by the Speaker.
In accordance with the Order of the House of 4 July 2017, only a member of the Conservative Party may be a candidate for the Chair of the Treasury Committee. However if more than one candidate comes forward (likely) all MPs (of whatever party) are eligible to vote in a ballot. So far former ministers Justine Greening, Sam Gyimah, Steve Baker and Mark Field are among those rumoured to be considering running for the post. Philip Hammond has distanced himself from an early rumour that he might also be interested.