Queen’s Speech braces better-off for tax hikes to get post-Covid finances under control

·4-min read
 (REUTERS)
(REUTERS)

The Queen’s Speech today braced the better-off in Britain for tax hikes to get the nation’s crippled public finances under control once the post-pandemic economic recovery already starting is secure.

People would have to “contribute a little more” to rebalance the books, as would big, profitable companies. The Queen told Parliament: “My Government will ensure that the public finances are returned to a sustainable path once the economic recovery is secure.”

The warning crystalised the huge challenge facing the Government to tackle the highest public borrowing since the end of the Second World War, while also delivering on its ambitious “levelling-up” agenda, channelling billions more to Scotland to prop up the union, and cutting NHS waiting lists which have soared during the pandemic.

In his introduction to the Queen’s Speech, which includes 29 bills setting out the Government’s legislative programme for the next parliamentary session, Boris Johnson did not mention restoring the public finances but unveiled a long lists of ambitious policies to reshape Britain.

They include:

  • A promise to “turbo-charge” the economic recovery in every part of the country, “increasing and spreading opportunity”.

  • A new Lifetime Skills Guarantee for “flexible access” to high quality education and training throughout people’s lives.

  • Turning Britain into a “science superpower” with “record sums” being invested in research and development.

  • A Union Connectivity Review, to counter calls for Scottish independence, as part of a transformation of rail and bus services.

  • The creation of thousands of skilled green jobs.

  • Giving more people a chance to own their own home, and making renting “fairer” including by effectively abolishing ground rent on new long residential leases.

  • A pledge that “no child should be left behind” after the devastation caused to education by the pandemic.

  • An outline of the plans to address the public finances was in the executive summary of the Queen’s Speech after the Government borrowed hundreds of billions to protect the country’s health and economy during the Covid-19 crisis.

It stressed this would be done through a “fair and progressive” package to achieve fiscal sustainability, deliver “first-class” public services and build the future economy.

More details were fleshed out in a section on public finances which warned that while borrowing costs are affordable now, “interest rates and inflation may not stay low forever”.

It added that measures announced in the Budget in March would bring debt under control, through a “fair and progressive package”.

It stressed: “This approach asks the largest, most profitable businesses to contribute, and for people to contribute a little more too, in order to continue to fund excellent public services and investment.”

Chancellor Rishi Sunak announced a series of tax changes in the spring including the higher rate income tax threshold to be frozen at £50,270 from April 2021 levels to 2026, tax-free personal allowance to be frozen at £12,570 from April 2021 levels to 2026, inheritance tax thresholds, pensions life time allowances and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26.

Leading economists, though, have warned that these tax rises, and those on big businesses, still left a multi-billion pound hole in the public finances which most likely would have to be addressed through more tax hikes or extra borrowing. Other bills and commitments in the Queen’s Speech include:

  • An ambition to “lead the world” by developing a new cancer vaccine.

  • A Health and Care Bill to boost co-operation between these two sectors, but no detailed proposals on how to deal with the adult social care crisis such as a new cap on how much individuals have to contribute.

  • A Planning Bill to spark a house-building surge in specified areas.

  • Axing the Fixed-term Parliaments Act in a Dissolution and Calling of Parliament Bill, with speculation Mr Johnson could call the next election in 2024.

  • A Police, Crime, Sentencing and Courts Bill which will increase sentences for the most serious offenders.

  • A draft Online Safety Bill to offer better protection for children.

  • A Counter-State Threats Bill to expose foreign spies, under diplomatic cover, in Britain.

Ahead of the Queen’s Speech, Conservative MPs called for a cap on care costs to stop people having to sell their homes to pay for social care.

Former health secretary Jeremy Hunt told Radio 4’s Today: “It’s an incredible worry for people. It’s a lottery. You don’t know — that could be you.”

Care groups, charities and politicians have been long calling for a plan to reform and “fix” the sector, which the Prime Minister promised in his first speech after being elected in July 2019.

The Government has said improving the adult social care system remains a priority and it will bring forward proposals later this year.

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