July 7, 2021

Europe

UK: As England reopens, party politics remains in flux

BY Carsten Nickel

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( 5 mins)
  • The government is betting on the full reopening of England on 19 July, but it remains unclear what level of health system stress will be politically acceptable in winter.
  • The new health secretary could boost fiscal conservatism in the cabinet ahead of difficult talks about financing social care.
  • The biggest source of policy uncertainty remains ongoing party-political change, as was demonstrated once again in recent by-election results.

The full reopening of the English economy on 19 July is a high-risk policy which Prime Minister Boris Johnson admits may see new daily cases of Covid increase to 50,000. However, the link between new cases, hospitalizations, and deaths appears to be weakened. Moreover, some in government have been making the case for opening up now, as a wave of cases for younger people in the summer is preferable to a big wave in the winter when the national health service will be less likely to be able to cope.

The government is calling the reopening irreversible, but an unanswered question remains what level of stress will be politically acceptable in a health system that has – even before the pandemic – experienced annual’winter crises’ simply due to the seasonal flu. Pressure on the system might increase further this year given fears of a major seasonal flu outbreak after last winter’s lockdown.

New health secretary

Politically, however, the cabinet balance has swung further in the direction of enthusiasm for opening up. New Health Secretary Sajid Javid has positioned himself accordingly, in this way appealing to the right of the Tory party. A former chancellor, he also sees himself as a fiscal conservative and a Thatcherite. This, in turn, has fueled speculation that he and his successor at the Treasury, Rishi Sunak, may work closely together to try to ensure that Johnson’s’spend, spend, spend’ tendencies are restrained by a need to raise revenue.

The health secretary, however, has a limited role within government outside his portfolio. He will not be a major player in the government’s spending review and taxation decisions. Those debates will be between the Treasury holding the purse strings and Number Ten, which wants to spend without limit but is eager to avoid taxes hikes. In his area, health, Javid is likely to ask for more rather than less money.

Social care and fiscal issues

Where Javid’s fiscal conservatism might be in evidence is in funding any new settlement for social care. It is likely that Javid and Sunak will propose to Johnson an additional levy to at least partially pay for any major new spending in this area. Roughly GBP 5-10bn per year of extra spending is likely to be required to reduce the numbers of people having to sell their homes to pay for social care. At the moment, UK families with assets over GBP 23,000 are left to pay for social care bills and invariably end up selling the home of the parents that have gone into care.

However, in line with the Tory manifesto, Johnson is opposed to any increases in income tax, national insurance, or VAT. The PM is also keen to avoid taxing older people more, as they tend to form much of his electoral base. But he may find it far more difficult to resist a strong axis of his chancellor and the health secretary.

At the moment, the most likely options for raising money for Sunak in the autumn are clamping down further on pensions tax relief, a new online sales tax combined with a reduction in business rates to help the high street, and the social care levy above. Other possibilities include a one-year alteration to the triple lock for pensions to avoid it being excessively high as it is linked to earnings growth (but Johnson is resisting this) and raising capital gains tax, but that would be very unpopular with traditional Tory voters and party donors.

Electoral change, continued

Uncertainty around fiscal and health policy remains heightened amid ongoing political change. The Tories are nine points ahead in national polling, which is extraordinary after 11 years in office with spending cuts, Brexit, and the pandemic. Johnson’s hope is that a sharp economic recovery following the pandemic will be enough to provide him with another majority in 2023/24. However, as discussed in the past, the Tories’ continued appeal can only be fully understood in light of the party’s fundamental overhaul under Johnson.

But this also creates risks, as was demonstrated by a shock defeat to the Lib Dems in a by-election in the traditional Tory constituency of Chesham and Amersham, followed by a failure to win Batley and Spen in another by-election from Labour. The Conservatives are now waking up to the threat from southern former Tory supporters who are opposed to Johnson’s spending ambitions in the North. These voters also fear suggestions that Johnson’s new planning policy threatens to build new homes in their backyards.

However, these coordination issues are difficult to resolve in the majoritarian electoral system. The opposition is struggling even more with it. Labour leader Sir Keir Starmer would have faced a leadership crisis and a possible challenge if he had lost Batley and Spen. The win has gained him some time, but it remains difficult to see how he could lead Labour to victory at the next general election in 2023 or 2024.

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