When George HW Bush said, “Read my lips: no new taxes” as he accepted the Republican nomination for president in 1988, he thought he was on safe ground. And he would have gotten away with it if it hadn’t been for those meddling kids in Congress, where a Democratic majority forced him to put up taxes in a 1990 budget.
Bush insisted that he hadn’t imposed any “new taxes” – he had only increased existing ones. And, surprisingly, American voters seemed to accept this sophistry. He seemed so popular that the Democrats struggled to find a candidate to put up against him in the 1992 election.
But then the economy went into recession and a little-known governor of a small southern state ran against Bush as a New Democrat. Bill Clinton made Bush pay a heavy price for his tax pledge in the end; Bush’s broken promise was played like a broken record in the election campaign.
The other case study for Rachel Reeves as she prepared Wednesday’s Budget was Nick Clegg’s promise in the 2010 election to oppose a rise in university tuition fees. It was followed not just by a breach of the promise, but by the appointment of fellow Liberal Democrat Vince Cable as the cabinet minister who would sponsor the legislation to triple fees.
It caused an instant and irrecoverable drop in support for the Lib Dems – although it wasn’t until after five years of coalition government that they faced their reckoning, being cut down from 57 seats to eight.
On other occasions, though, manifesto pledges have been broken with minimal consequences. Tony Blair promised not to introduce tuition fees in the first place in the 2001 election and it was hardly an issue at the subsequent election. (In 1997, he promised a referendum on electoral reform, but no one cared about that.)
In 2019, Boris Johnson promised not to put up income tax, national insurance or VAT, but then put up national insurance contributions in 2022; and Rishi Sunak later cut national insurance. Although the Conservatives were smashed in the 2024 election, it wasn’t that specific broken-and-then-restored promise that did the damage.
So where, in history’s pantheon of broken election promises, will Labour’s pledge to “not increase taxes on working people” take its place?
It is now being confidently reported that Reeves will raise employers’ national insurance contributions on Wednesday, and that this will be the main source of revenue for what she has since admitted will be a tax-raising Budget.
Is that a broken promise? The undeniably impartial Paul Johnson of the Institute for Fiscal Studies believes it is. “Let’s see whether she does it,” he said, a couple of weeks ago. “It seems to me that would be a straightforward breach of a manifesto commitment. I went back and read the manifesto, and it says very clearly we will not raise rates of national insurance. It doesn’t specify employee national insurance.”
In fact, it is anything but straightforward, as the last two weeks have shown, because the promise not to increase national insurance is preceded in the manifesto by the reference to not increasing taxes on “working people”. Hence the theatre of the absurd involving savings, shares and buy-to-let landlords, as journalists and Oliver Dowden, the deputy leader of the opposition, sought to obtain a definition of a “working person”.
At one point, Keir Starmer seemed to be describing a Britain in which a significant minority of the population live off the interest on their wealth as if we were in the 1920s rather than the 2020s. Strange terms entered the debate, such as “cheque book” and “passive income”.
Passive income sounds a bit like “unearned income”, recalling a time for anyone no longer receiving a winter fuel payment when there was such a thing as an “unearned income surcharge” of 15 per cent on income from savings and dividends (in addition to a top rate of income tax of 83 per cent, taking the highest marginal rate of income tax to 98 per cent, which really was this country’s tax code in the Seventies).
Which brings us back to “read my lips”. The importance of that phrase is not that Bush Sr lost an election because he broke a high-profile tax pledge, but that he could have won. If it hadn’t been for the 1990-91 recession, he might have persuaded the American voters that he hadn’t imposed any “new” taxes.
Hence the importance of the struggle to define “working people”.
If Reeves and Starmer can persuade middle-ground voters that they have tried to protect people like them in the Budget, they have a chance of escaping their wrath. It helps that most voters, before the election, expected Labour to put their taxes up. It might help a little, too, that, as I argued last week, taxes ought to go up to pay for the public services that the voters say they want.
But the survivability of a tax rise might depend, as it did in America in 1992, on the state of the economy. If the economy is growing by the time of the next election, and earnings have been rising faster than prices for a while, a tax rise in the early months of the government might be forgotten.
Otherwise, Kemi Badenoch might become the Bill Clinton of the Tory party...
