Liz Truss: I was never given ‘realistic chance’ to enact tax-cuts

Liz Truss has said she was never given a “realistic chance” to implement her radical tax-cutting agenda by her party, in a 4,000-word essay in the Sunday Telegraph.

No apology for crashing the economy. – Owl

Analysis by Jonathan Blake contained in wider report:

After 100 days of “soul searching” we have a version of events from the shortest serving UK Prime Minister in history.

This is Liz Truss’s catastrophic time in office, described and defended in her own words.

At some length, she attempts to argue her case and answer for her actions. There is reflection and regret but not the apology which many might expect.

What burns through this 4000 word essay is a sense from Liz Truss that almost everything was against her as she makes a case for what might have been.

The system, officials, Conservative MPs all played a part, she argues, in stopping her from achieving her aim of economic growth through tax cuts and de-regulation.

There are breath taking reminders of how high the stakes were as her policies sent shockwaves through the economy – Kwasi Kwarteng had to go to avoid “a serious meltdown for the UK” and “the starkest of warnings” came from officials that the country may have to default on its debt.

Despite her downfall, Liz Truss argues many still share her enthusiasm for what she was trying to achieve.

Teignbridge to cancel council tax increase

Teignbridge is cancelling a planned council tax rise next year, although one councillor feels that it should invest more money in creating jobs instead.

Rob Kershaw, local democracy 

The district council is set to propose a budget of £59 million for the next financial year, with a third of a million pounds left over from the council’s income this year.

Teignbridge wants to continue to waive council tax for those on the lowest income and while there is a council tax increase, it will not come into effect until 2024-25.

The £5.54 reduction in council tax for all households in 2023-24 will cost £330,000, but Conservative leader Cllr Phil Bullivant (Bradley) feels that the money might be put to better use elsewhere.

“I’m trying to think of how best to spend that £330,000 given our £4.3 million black hole,” he said at an overview and scrutiny committee meeting on Thursday [2 February]. “I feel it would be better spent on creating jobs than giving out £5.54 as council tax support.”

Cllr Richard Keeling (Liberal Democrat, Chudleigh) explained that Teignbridge only gets 10 pence on the pound of council tax, so it wants to use that to support its residents.

“We have spent a lot of time on how can Teignbridge help our residents with the cost of living crisis with those who are struggling the most so we are planning to give back to householders the Teignbridge share of the council tax increase,” he said.

Revealed: only 10 of Boris Johnson’s promised 40 new hospital projects have planning permission

Only a quarter of the 40 hospital construction projects that were at the heart of Boris Johnson’s 2019 general election manifesto have secured full planning permission, the Observer can reveal, amid angry claims from NHS figures that there is no chance the schemes will be delivered on time.

“There’s a 0% chance there’s going to be 40 new hospitals by 2030,”

Promises, promises – Owl

Michael Savage 

Ministers have repeatedly claimed that the hospitals will be delivered by 2030, despite concerns from health chiefs and economists that “woefully insufficient” funding and rising costs will scupper the plan and put NHS capacity at risk.

However, an investigation by the Observer has revealed that only 10 of the 40 projects have the full planning permissions they need to go ahead. Those involved in some of the projects said they had already faced lengthy delays, leaving them with decrepit and often unusable buildings.

“There’s a 0% chance there’s going to be 40 new hospitals by 2030,” said the boss of one of the NHS trusts awaiting a new hospital. “We’ll be moderately lucky to have eight. At the moment we’re doing loads of maintenance work on an ongoing basis, trying to sort out roofs and theatres and all those things. Some hospitals are literally falling down.”

Analysis by the Observer, combined with official data obtained by the Lib Dem deputy leader, Daisy Cooper, reveals that some projects only have outline planning permission, which is insufficient to allow building work to commence. Many of the projects have no planning permission at all.

“This is truly scandalous,” said Cooper. “The Conservative government is on course to break their flagship NHS promise and refuse to admit it. Communities already suffering from dangerously long ambulance waiting times are also left with crumbling hospitals which are falling apart at the seams. The government needs to stump up the cash to keep ageing hospitals running and ensure patients are treated in safe environments.”

The programme has been beset with controversy ever since Johnson pledged to build “40 new hospitals” in the 2019 Conservative manifesto. Since then, it has emerged that many of the proposed projects are not new hospitals, but extensions or refurbishments. The independent National Audit Office is also investigating the programme.

According to the latest filings, 13 of the projects have no planning permission. Another 17 have only secured some kind of preliminary agreement, or have no confirmed permission. Several of the NHS trusts involved said they were awaiting a funding settlement from the government to progress the planning and design stages of their proposed projects.

One of the projects causing most concern is the redevelopment of Epsom and St Helier hospital, south London, which has already been hit with delays. “The development is needed now more than ever before,” said an official. “We have crumbling, cramped buildings, many of which pre-date the NHS. Our patients deserve a better environment to receive treatment. Our staff deserve a better environment to deliver care.”

Any delays pose a significant political problem for the prime minister, Rishi Sunak. One trust chief executive with a scheme in the programme, speaking anonymously, said: “Let’s say there’s an election in 2024, 2025, if they had eight or a dozen or 20 hospitals that were well on the way to construction and you had cranes outside, you’d get loads of good photos out of that. But with the best will in the world, you’re just going to have a few hospitals with a hole in the ground. I think they’ve lost their opportunity to maximise political benefit around this.”

Another said: “Our own hospital is crumbling before our eyes – so much so, that parts are completely unusable. Delays are hugely inefficient and are costing millions which is bad for the economy, taxpayers and the health of our patients.”

In England, there are still 284 hospital buildings pre-dating 1948, when the NHS was created. Most of the hospitals due to be replaced in the new hospital programme have buildings constructed before the service’s inauguration. Latest estimates suggest the maintenance backlog for the NHS estate reached £10.2bn in 2021-22, more than twice as high as it was a decade ago. With inflation in the construction sector reaching 10% in September 2022, the cost of clearing the maintenance backlog might yet increase further.

Laurie Rachet-Jacquet, an economist at the Health Foundation, said: “Last year we estimated that, depending on NHS productivity, we would need 23,000-39,000 new beds in England by 2030: this is equivalent to around 38–64 average sized hospitals. Hospital costs vary greatly but based on an estimated cost of around £450m, then this is approximately £17bn–£29bn in the next seven years.

“The promised new hospitals for the government’s programme fall within the bottom of this range. But the delays and uncertainty about funding are worrying. The money allocated thus far is woefully insufficient and given rising inflation will deliver still less than anticipated and it is not clear that the government’s proposals go far enough to meet future hospital care needs.”

Saffron Cordery, the deputy chief executive of NHS Providers, said: “Trusts need clarity and commitment from the government about the much-delayed New Hospitals Programme (NHP). Shovels and picks at the ready, trusts in the NHP are poised to get to work but are still waiting for confirmation of funding. Those forced to delay for many months now face spiralling, inflation-driven cost increases far above initial forecasts. The NHP can transform healthcare by providing badly needed renewal for acute, mental health, community and ambulance services. But we need to get a move on.”

A Department of Health and Social Care spokesperson said: “We are investing £3.7bn for the first four years of the New Hospital Programme and remain committed to all schemes that have been announced as part of it. Requirements for planning permission are dependent on construction timelines over the decade and we continue to work closely with trusts on their plans. We are developing a national approach to constructing new hospitals so schemes can be built more rapidly and ensure value for money.”

Environment plan for England asks farmers to restore nature – but changes are likely to be superficial

“Ambitious road map” leading nowhere – Owl

Elise Wach 

The UK government’s environment improvement plan pledges to restore 500,000 hectares (1.2 million acres) of wildlife-rich habitat, create or expand 25 national parks, invest in the recovery of hedgehogs and red squirrels, tackle rising sewage pollution and improve access to green spaces in England over the next five years.

Since 69% of land in England is farmed, much of the plan’s success in improving nature will hinge on its reform of the country’s agricultural sector. Farming is implicated in the extinction risk of 86% of threatened species globally, and accounts for roughly one-third of all greenhouse gas emissions driving climate change, not to mention soil erosion and river pollution.

The government has described the plan as an “ambitious road map” to a cleaner, greener country. Some of the targets certainly are ambitious. For example, the plan aims to bring 40% of farmland soils into sustainable management by 2028.

This would be a monumental shift in how soil is cared for in England. Intensive agriculture has slashed the amount of carbon soils store by 60% and put 6 million hectares across England and Wales at risk of erosion or compaction, costing an estimated £1.2 billion a year.

But the plan doesn’t actually explain how sustainable management will be expanded. The only action proposed is to create a “baseline map” of soil health in England by 2028.

The plan also aims for 65%-80% of landowners and farmers to adopt nature-friendly farming by 2030. “Nature-friendly farming” is not defined, nor is it based on any internationally recognised principles, making it impossible to assess the government’s progress.

The plan only aims for this to be adopted on 10%-15% of farmers’ land too, which would amount to a mere 6%–12% of England’s farmland overall. Research shows that protecting small pockets of land won’t benefit biodiversity if the majority of farming in the surrounding landscape is ecologically destructive.

All carrots, no sticks

The main instrument the government has chosen to shake up agriculture is the Sustainable Farming Incentive (SFI) scheme. SFIs are payments to farmers based on actions which benefit the environment. For example, a farmer could receive up to £40 a hectare for their efforts to improve soils on arable fields.

An integrated strategy for converting farmland to more sustainable management would mean increasing the diversity of crops grown, helping healthy soils regenerate and eliminating pesticides, all at the same time. Instead, SFI payments reward farmers for making standalone changes.

This might mean putting out seeds for birds in winter or leaving a grassy strip on an unused section of land to provide habitat for insects, though it could also mean significantly cutting down on pesticides. This system offers flexibility for landowners, but research shows that farmers are more likely to choose environmental improvements which don’t require significant changes to how they farm.

This is the fatal flaw in the government’s flagship farming reform. Farmers can continue doing things which harm soils and wildlife on the (majority) productive parts of their land while receiving benefits for sprinkling pro-environment measures around the edges.

Wildflower margins which are planted around pesticide-soaked crops under the pretence of supporting pollinators offer a common example. Not only is the continued use of pesticide on the crop harmful in itself, the wildflowers actually accumulate the chemical residue, sometimes in higher concentrations than in the crops themselves. This renders the wildflower pollen harmful, rather than beneficial, to bees, butterflies and other bugs.

An arable field with a margin full of wildflowers to the right.

Adding wildflower strips to field margins won’t undo the damage of intensive farming. Paul Maguire/Shutterstock

The environment improvement plan heavily relies on voluntary participation in lieu of regulation, not only through SFIs but quality assurance schemes such as Red Tractor. For example, fertilisers and slurries (semi-liquid manures) emit ammonia, a greenhouse gas which is bad for human health. Rather than regulate this, the plan favours an “industry led” approach with Red Tractor certifications.

Red Tractor is yet another voluntary scheme, and has been criticised as ineffectual for encouraging improvements to the environment and animal welfare on farms. The plan has only suggested that it will consider regulating dairy and intensive beef farms in the same way that it regulates intensive poultry and pig farms.

Even if regulations were to be expanded, environmental regulators visit farms so rarely and superficially that it might not make a difference. On average, it is estimated that English farms can expect an environmental inspection once every 263 years. Despite being regulated, intensive poultry and pig operations are a major cause of river pollution.

Beyond England’s borders

In post-Brexit policy discussions, some landowners and consumers worried that payments for environmental improvements would outweigh income from food production, meaning less homegrown fare. Government discourse has since emphasised that farmers will receive support to deliver on environmental outcomes “alongside” food production. Nothing in the plan ensures this.

Other countries have a food strategy which guides farmers to grow produce necessary for healthy diets and determines how much should be imported or exported. Responsibility for food in England is divided between 16 different departments, with no overarching framework or body.

SFIs and the new plan do very little to stem the environmental consequences of food produced beyond England’s borders. The aggregate ammonia emissions from crops and livestock imported into England are significantly higher than those stemming from domestic production.

And despite its favourable growing conditions, the majority of fruit and vegetables eaten in England are imported, contributing to water scarcity and pollution in other countries. Preserving the environment at home while polluting and degrading environments abroad is nonsensical, as all ecosystems are interconnected. But it is also shameful to shift the environmental burden of English diets onto other people.

If the government and citizens are serious about improving the environment, then policies must require that ecological principles are integrated into food production. At present, voluntary measures and weak regulation are all that is offered.

Nadhim Zahawi: it was the paltry size of his tax bill that should shock us 

“The only tax he was required to pay on £27m was £3.7m. That implies an average tax rate of less than 14%, lower than the rate for someone working full-time on the minimum wage.”

Arun Advani (an associate professor of economics at the University of Warwick and a research fellow at the Institute for Fiscal Studies) 

Nadhim Zahawi’s tax row reveals an even bigger scandal: the rich are getting a tax break that those on low incomes can only dream of.

While the revelation that the former Conservative chair had to pay a tax penalty was shocking, the bigger concern is that the only tax he was required to pay on £27m was £3.7m. That implies an average tax rate of less than 14%, lower than the rate for someone working full-time on the minimum wage.

Two weeks ago, the Guardian broke the story that Zahawi had been fined by HMRC for not taking reasonable care in his tax affairs. This “carelessness” meant he had not paid £3.7m in tax that he owed from the sale of £27m worth of shares in YouGov, the company he co-founded in 2000.

His belated payment of the tax bill, plus interest and a fine, while he was chancellor, led to a total payment of about £5m. The revelation ultimately led to the ethics investigation that was his downfall.

Assuming Zahawi’s bill was related to unpaid capital gains tax, his startlingly low rate was possible because capital gains are taxed at much lower rates than other income.

While the tax rate for someone earning a salary of £270,000 is 47%, made up of 45% income tax above £150,000 and 2% national insurance contributions above £50,000, someone taking home 100 times as much can pay the much lower 20% capital gains tax rate.

And some gains can qualify for either business asset disposal relief or investors’ relief, bringing the rate on those gains down to 10%, and further reducing the average rate.

These low tax rates tend to benefit the wealthiest in society, the asset-rich. Capital gains are the returns that someone makes on selling an asset that has grown in value – be it a property, shares or antique vase.

But most capital gains come not from the sale of second homes by the upper middle classes but from the sale or dissolution of businesses by individuals who both own and manage those businesses. And those gains are incredibly concentrated: half of all taxable gains in the entire country go to about 5,000 people, who each receive more than £1.5m in gains.

Perhaps this would be worth it if there was compelling evidence that these low rates had beneficial side-effects for growth and employment. But the current structure of capital gains tax is neither good for growth nor good for all of those who receive money in the form of gains.

It is bad for growth because the gap between capital gains tax and income tax rates encourages people who could be brilliant employees to instead be mediocre self-employed managers, contributing to the long “tail” of unproductive firms in the UK. Someone taking home £1m in gains would pay up to £370,000 less tax than if they were earning the same as a salaried employee.

It is also bad for those actually investing serious cash in companies, because in times of high inflation they can pay large amounts of tax on increases in the value of those investments, even if this increase doesn’t keep up with the price of ordinary goods and services.

So what is the answer? One not particularly radical solution would be to largely go back to the capital gains tax structure imposed by the Conservative chancellor Nigel Lawson in 1988. Lawson taxed capital gains at the same rate as income, and provided an allowance for inflation. A move back in this direction, with also some “smoothing” to account for gains being received less frequently than income, would be eminently sensible.

As a bonus it would raise about £16bn. This could pay for quite a lot of wage increases for teachers, nurses and firefighters who are striking because their incomes are falling relative to the cost of living. Or for green investment. Or for the tax cuts the chancellor so desperately craves.