Bored of Brexit? Don’t switch off from the election just yet

Published on Incomes and Inequality

The Prime Minister called an election, and told the country it was an election about delivering Brexit. Financial markets and most commentators agreed, focusing their responses on what a surprise vote on 8th June might mean for the shape Brexit takes.

But before everyone, leavers and remainers combined, who can’t think of anything worse than another vote on Brexit simply switches off, it’s worth pausing – and not only because elections can obviously lead to a change of government. You might be being told that this election is only about Brexit, but the truth is, even if the polls and pundits are right and the result is a return of Theresa May to Downing Street, the election will still make a big difference on some major areas of policy that have nothing to do with Brexit. Here’s just a few.

The election probably means earlier tax rises for the self-employed. The background here is the Treasury’s recent hasty u-turn on a National Insurance rise for the self-employed in the March Budget. What was unusual about the u-turn was the Chancellor announcing a tax rise wasn’t going ahead, while saying “the Government continues to believe that this is the right approach.” As the Chancellor explained at the time, the basis for this unusual position was the Conservative Party’s 2015 election manifesto, which ruled out any increases in National Insurance:

Since the Budget, however, there has been much comment on the question of commitments made in our 2015 manifesto.…It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made. In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in National Insurance Contribution rates in this Parliament.

The key issue here is the last sentence – where before this week “this Parliament” meant before right up to 2020 but now it means 7 weeks’ time. Just to ram the point home, the Chancellor in Washington today criticised the previous manifesto pledge saying: “the commitments that were made in the 2015 manifesto did and do today constrain the ability to manage the economy flexibly.” So the calling of this election may well mean some of the (unjustifiable) tax gap between the self-employed and employees will be closed sooner rather than later. This is obviously not welcome news for the self-employed, but good news for fairness between employees and the self-employed, and for Britain’s tax base.

Second, this election may well mean lower state pension increases. That’s because while the 2015 Conservative manifesto overseen by David Cameron and George Osborne made a big deal of the commitment to the so called ‘triple lock’ on state pension increases (with the pension increasing each year by the higher of inflation, earnings or 2.5 per cent) the new occupants in Downing Street have been less keen. The Prime Minister, when explicitly asked about the triple lock in Maidenhead today, simply pointed to the government’s record, with no commitment to continue it. For all the heat and debate the triple lock generates, scrapping the triple lock from April 2018 would have little impact over the rest of the decade. This change is therefore not really what existing pensioners get in the next year or two but about the long term: ending the lock would reduce the value of basic State Pension by around £300 a year by 2030 and lower long term spend by almost a percentage of GDP by around 2060.

Third, the calling of an election makes the chance of new grammar schools actually being opened much much more likely. The Prime Minister’s policy has to date faced open opposition from much of the House of Lords and from many on her own back benches, and understandably so given the overwhelming evidence of the challenges children from poorer backgrounds face gaining fair access to such schools. Both sets of opponents have been emboldened by the fact that the 2015 Conservative manifesto talked about expanding good existing grammar schools, but made no mention of overturning the prohibition on opening new grammar schools. Calling this election ahead of legislation that will scrap that prohibition being voted upon increases the chance of it passing hugely if Theresa May is returned to Downing Street. Every Conservative MP will have stood on a platform endorsing such a move, and the House of Lords will be much more reluctant to vote down a manifesto plege.

So yes, lots of the next seven weeks will focus on Brexit, and rightly so given how much delivering it will dominate the work of the British state for the next decade, but let’s not forget that even without a change in Prime Minister some big changes in policy will have been brought about by this election. Obviously if the election means a new Prime Minister then the changes will be even bigger still…