Taxes will be cut and public spending increased if Boris Johnson makes good on the pledges he has made in recent weeks while campaigning to be prime minister.
In a marked reversal of the fiscal restraint enforced over the past nine years, Johnson has committed himself to a multibillion pound programme of measures paid for by extra government borrowing.
The plans – some of which are sketchy – will be fleshed out in the autumn budget and a possible three-year Treasury spending review, should the new chancellor choose to have one this year.
Johnson’s proposals include:
1. Raising the threshold at which income tax is paid at 40% from £50,000 to £80,000
Cost: £9bn. Only 12% of people in the UK earn more than £50,000 a year, so this pledge would help those on the highest incomes. Johnson believes, however, that it will appeal to aspirational voters. Some of the giveaway would be clawed back by higher national insurance contributions but the net cost would still be £9bn a year, according to the Institute for Fiscal Studies (IFS).
2. Increasing the starting point for national insurance contributions to £12,500
Cost: £11bn. At present people pay NICs when they earn £166 a week and income tax when they earn £12,500 a year. Johnson wants to gradually align the two systems by raising the NICs ceiling to an annual £12,500. Doing this in one go would cost £11bn a year and take 2.4 million people out of paying NICs altogether, but would still offer most benefits to those on higher earnings.
3. Raise education spending to £5,000 for every secondary school pupil and £4,000 for each primary school pupil
Cost: £4.6bn. Theresa May’s successor says he will reverse the cuts in per pupil spending seen since 2015 and ensure that it holds steady until 2022-3 during a period when the number of children in school will be rising. The bill for reversing the cuts is £3.5bn. Holding per-pupil funding steady until the projected end of the current parliament will cost a further £1.1bn.
4. Employing an additional 20,000 police officers
Cost: £1.1bn. Any pledge to be tough on law and order tends to go down well with the Conservative party faithful, and Johnson wooed them during the leadership race with a recruitment policy that will cost £1.1bn a year.
5. Free TV licences for the over-75s
Cost: £250m. In a deal struck in 2015, George Osborne handed financial responsibility for providing free TV licences to the BBC in return for extra funding. The BBC has said it intends to means-test this benefit so that only those on pensioner credit have their TV licences paid for them. Johnson has said he will ensure the decision is reversed at a cost of £250m a year.
6. Raising the level at which stamp duty is levied
Cost: £3.8bn. There have been reports that the incoming prime minister would like all house sales under £500,000 in England, Wales and Northern Ireland to be exempt from stamp duty. The IFS says stamp duty on housing transactions below £500,000 was £3.8bn in 2017-18, but it would expect the full cost to be slightly higher because some properties above £500,000 would be lowered beneath the threshold to avoid the tax.
7. Nationwide full fibre broadband coverage by 2025
Cost: unknown. Johnson has said he wants the UK to have a complete full-fibre broadband network by 2025, eight years earlier than the current government is planning. Industry experts say this is not feasible in the time available, given coverage is currently less than 10%.
8. The creation of six free ports in the UK
Cost: unknown. Johnson said while on the hustings with Jeremy Hunt that he intended to create “about six” free ports – zones designated by the government to pay little or no tax in an attempt to boost economic activity.
The next prime minister has given no further details of this pledge. The cost would depend on: whether the benefits of the extra growth exceeded the lost tax revenue; the size and location of the free ports; the terms under which they operated;, and whether the boost to activity in one area came at the expense of a neighbouring region outside the zone.
9. Review HS2 and build HS3
Cost: unknown. So far £4bn has been spent on HS2 – the high-speed rail project designed to link London to cities in the Midlands and the north. But the final cost has already risen from £32bn to £56bn and reports suggest it has now jumped to between £70bn and £85bn. One of Johnson’s big early decisions will be whether to scrap HS2 and spend the money on alternative rail infrastructure such as linking the big cities of the north through HS3. Any savings generated by scrapping HS2 will almost certainly be recycled into other transport projects.
10. Raising the national living wage
Cost: unknown. The government employs one in six of the people working in the UK, so it would be affected by Johnson’s promise to raise the national living wage, which is £8.21 per hour for those aged 25 and over. But as yet, Britain’s next prime minister has not put a figure on the increase he has in mind or even whether it should rise by more than inflation.