Boris Johnson’s newest speech on Wednesday covered a number of important points of contention that have recently arisen and gathered media attention. His discussion of both the government adherence to strict immigration control and the upcoming 2022 increase in National Insurance have addressed particularly ardent criticism and offer insight into the government’s vision.
A section of the speech was devoted to the commitment to the creation of a “high wage, high-skill, high productivity” economy which lies at the heart of the post-Brexit vision. In relation to this, Johnson admitted it will “take time” to restructure the UK economy following the historical exit from the European Union. In spite of companies’ requests for a relaxation of the imposed immigration controls which form a barrier to the resolution of the ongoing shortage of low-skilled labour, there appears to be no intention of returning to “the same old broken model” of uncontrolled immigration. It is unclear what future this will create as the current shortage of HGV drivers continues inflaming the existence of petrol queues and spells the waste of millions of pounds worth of crops from the domestic agricultural sector.
Whilst the granting of short-term visas meant to tackle a feared food shortage during the build-up to Christmas has been met with great ambivalence by both industry leaders and opposition politicians, what has been shown with clarity by Indeed UK’s analysis is that interest in taking advantage of them has mostly spiked not in Europe, as was desired and expected, but primarily in India, the UAE, and South Africa. Whether the possibility of these potential drivers likely lacking the necessary qualifications will end up as an impediment to the timely prevention of food shortages during the festive season or not is something that we will have to observe in the upcoming months.
On a similar note, it is difficult to predict how long it will take for the labour market to adapt if we are to consider the implications of the extremely high wages for drivers being the result of inflationary pressure, an incentive to labour supply which is only viable in the short run. Johnson stated that the pursuit of the government’s high wage, low tax in Britain “will take time, sometimes it will be difficult, but that was the change people voted for in 2016 and 2019.” Admittedly, a solution to the issues faced by Britain in the wake of such a large shortage of labour for jobs like fruit picking which are traditionally deemed as “unattractive” is difficult to envision without a fundamental change in the immigration ideology adopted post-Brexit.
The full extent of immigration control’s impact on the economy and, by extension, the population will only become visible once we recover from the pandemic and the additional negative effects stemming from it.
The other main tender spot addressed by Johnson in his speech was the government’s decision to increase National Insurance contributions from April 2022 (the new tax is set to turn into a separate Health and Social Care Levy from 2023), which has been criticised even from within the Conservative Party for its ability to create a greater disadvantage for younger people and the lower paid. Although this goes back to the promise made by the government in the 2019 election manifesto, Johnson has previously stated the necessity of the increase as a result of the unexpected financial burden of the pandemic on the NHS. The surge of National Insurance by 1.25p in the pound is set to manifest as an average of around 10% extra contributions for workers earning below £50,000. In his speech on Wednesday, Johnson insisted he had been right to raise taxes instead of funding the NHS through additional public borrowing, claiming Thatcher would have also justified the decision through the rationale of “more borrowing now is higher interest rates and even higher taxes later.” Nonetheless, the possible regressive effects of the tax increase are yet another instance of showing the government’s focus on protecting high-income individuals and act as a reminder of the supply-side focus usually exhibited by the Conservative Party. Commending the private sector, including bankers, for the development of the Oxford/ AstraZeneca coronavirus vaccine within a year, Johnson continued by praising capitalism and using the situation to claim that “the answer is not to attack the wealth creators, it is to encourage them because they are responsible for the aggregate increase in the country’s health.”
Whilst few fresh policy announcements have been made during the speech, such as the introduction of a £3,000 premium, to encourage maths and science teachers into schools that need them most, what has become clear from Johnson’s speech is the dedication of the government to the pledges they have made even in the face of issues as large as the ones we are encountering. Whilst the wish of “high skill” “high wage” Britain seems to dismiss the necessary low-skilled jobs that are vital for the functioning of British society and the National Insurance increase may further fuel issues created by a regressive taxation system, we can only hope that the path the government is so set on taking will create the utopian Britain fantasised about prior to Brexit.
Written by the Economist Journalists at The Backseat Economist
Research compiled by Joe Eastment