Boris Johnson has set the scene for tax rises to help pay for the cost of the coronavirus crisis, as he laid out plans to use infrastructure investment and planning reform to try to fend off a looming recession.
In a major speech designed to launch the UK’s economic recovery from Covid-19, the prime minister promised to “build, build, build” to stimulate economic activity after the “vertiginous” drop in GDP over the past four months. He insisted he would not return to the austerity policies of David Cameron and George Osborne, but refused to rule out the possibility that tax hikes will be deployed to help fill the massive holes left in the public finances by the virus.
His efforts to portray his plan as a launchpad for Britain to “bounce forward” from the pandemic were overshadowed by the localised reimposition of lockdown restrictions to try to damp down an upsurge of infections in Leicester, with figures also showing sharp rises in areas like Doncaster and parts of London.
And critics scoffed at Mr Johnson’s comparison of his plans with Franklin Roosevelt’s New Deal, pointing out that the £5bn in accelerated spending announced by the PM amounted to just 0.2 per cent of GDP, compared to the 40 per cent figure deployed to lift the US out of the Great Depression in the 1930s.
Labour leader Keir Starmer said: “The prime minister promised a New Deal, but there’s not much that’s new and it’s not much of a deal.”
Mr Johnson said that the UK was facing a “generational challenge” and now needed to be prepared to deal with a “real, real crisis” for jobs across the country.
He admitted that many of the 9 million posts supported by chancellor Rishi Sunak’s job retention scheme “are not coming back” when the furlough arrangement end in October.
And he did not rule out unemployment busting through the 3.3 million level seen under Margaret Thatcher in the 1980s, though he promised to create “thousands” of high-skilled jobs by pouring state money into the construction of hospitals, schools and transport links and to guarantee apprenticeships and work placements for every young person.
In an acknowledgement of the scale of economic challenge facing the UK, Mr Johnson said the country had suffered a “vertiginous fall in GDP”.
“We know that people are worried now about their jobs and their businesses and we are waiting as if between the flash of lightning and the thunderclap with our hearts in our mouths for the full economic reverberations to appear,” he said.
“We must use this moment – now – to plan our response and to fix of course the problems that were most brutally illuminated in that Covid lightning flash.”
Mr Johnson set out plans for £1.5bn spending on hospital maintenance in England this year, as well as £1bn for the first 50 projects in a 10-year wave of school rebuilding and refurbishment over the next decade.
He announced £900m for “shovel-ready” project in local areas, £760m for school and further education college repairs, £142m to upgrade courthouses and £100m for road improvements this year.
Reforms to the planning system will make it easier to convert a disused shop or office into a home or a cafe without the need for a planning application or local authority approval.
Mr Johnson said a Project Speed taskforce would ensure the speedy delivery of projects to maximise the impact of investment as the UK emerges from the coronavirus pandemic.
But he alarmed environmentalists by saying that this would include measures to rein in the “newt-counting” assessments of the harmful impact of developments on natural habitats. And aides were forced to deny that there was any change to government policy on protecting the green belt after the PM said he he wanted to allow construction “on brownfield sites and other areas”.
He also risked triggering concerns about building on the green belt by saying he wanted to allow construction “on brownfield sites and other areas”.
Mr Johnson did not rule out breaching the Conservative manifesto pledge not to raise rates of income tax, VAT or national insurance in order to fill the black hold in the UK’s public finances left by the coronavirus crisis.
Asked whether the tax pledge remained intact, he said only: “I think you should really wait to see what the chancellor has to say in the course of the next few weeks and months.
“But I remain absolutely determined to ensure that the tax burden, in so far as we possibly can. is reasonable and that we continue to be a dynamic, competitive, open market economy.”
Suggesting that people should clap not only for health and care workers but also for “innovators ... capitalists and financiers”, the PM hinted that he would not be raising taxes on the rich by saying he did not want to launch ”some punitive raid on the wealth creators”.
But he also restated his election pledge to help the disadvantaged areas which have been left behind by the economic changes of recent decades, promising to “mend the indefensible gap in opportunity and productivity and connectivity between the regions of the UK”.
CBI director-general Carolyn Fairbairn said that Mr Johnson’s package offered “the first steps on the path to recovery” from a crisis which “risks fracturing communities for a generation”.
But she added: “Foundations are there to be built on. More is needed to prevent the uneven scarring unemployment leaves on communities.
“The reality is that longer-term plans will falter without continued help for firms still in desperate difficulty. Government intervention so far has saved countless jobs, yet anxious months for many still lie ahead. The focus on rescuing viable firms cannot slip while the UK looks to recovery, or earlier efforts could be wasted.”
Frances O’Grady, the TUC general secretary, described the PM’s spending commitments as “a huge disappointment” amounting to just 0.2 per cent of GDP.
“Today we face the biggest economic crisis in a generation,” said Ms O’Grady. “Without big fast action, millions face the misery of unemployment. Today’s announcements from the prime minister fall far short of what is needed.
“I hope next week’s emergency budget will see ministers take some real action. If the prime minister wants to match the scale of Roosevelt’s ambitions, he needs to deliver at least £150bn by 2024, not the reheated £5bn announced today.”