UK tax updates
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Sajid Javid, UK health secretary, has insisted that Britain remains a “low-tax country” in spite of a new £12bn annual increase to fund health and social care that leaves the UK with its highest tax burden since 1950.
Health and social care leaders complained that the cash injection of £36bn over the next three years was not enough. As MPs prepared to vote on the package on Wednesday, Javid claimed the money would leave post-Covid hospital waiting lists “much lower” but could not say when the treatment backlog would be cleared.
He also declined to say how much of the extra funding, which will initially primarily focus on the NHS, will eventually be transferred across to improve the country’s decrepit social care system.
Johnson is expected to win House of Commons approval of the package by a large majority in Wednesday’s vote, expected at 7pm, amid signs that a threatened Tory rebellion over the tax rise was fizzling out.
But there remains deep unease on the Tory benches over the plan and whether a £12bn rise in national insurance contributions and higher tax on dividend income will achieve radical improvements.
“There’s a danger that there won’t be enough doctors to do the extra operations and the money ends up going into higher pay,” said one senior Conservative MP. “That’s what’s happened in the past.”
The 1.25 percentage point rise in national insurance contributions for employers, employees and the self-employed — to be branded as a “health and social care levy” on payslips — will raise £25bn for NHS England, almost £5bn for healthcare in the devolved nations and £5.3bn for social care over the next three years.
But Matthew Taylor, chief executive of the NHS Confederation, and Saffron Cordery, deputy chief executive of NHS Providers, which together represent hospitals, doctors and other care providers, said the funding was insufficient for the challenges the service faced.
“Health and care leaders are now faced with an impossible set of choices about where and how to prioritise care for patients,” they said.
The social care sector complained it had been short-changed. Jane Townson, chief executive of the UK Homecare Association, said it was “nowhere near enough” and some measures could “create new risks”.
Mike Padgham, chair of the Independent Care Group, said it was a “huge opportunity missed for radical, once-in-a-generation reform of the social care system”.
Asked if taxes would have to rise again to fund social care improvements, Javid said that “enough money” was now available. Johnson has declined to rule out further tax rises in this parliament.
Javid, a Thatcherite, insisted that the Conservatives were being responsible in not borrowing to pay for the new investment and that even after the £12bn tax rise Britain would remain a low-tax country.
“The total tax burden as a proportion of our GDP is around 35.5 per cent,” the health secretary told the BBC’s Today programme. “That is still lower than France, Italy and Germany. We are still a low-tax country after this change and we will always remain a low-tax country.”
He said the extra investment in the NHS in England would result in “9m more checks, scans and treatments” each year. Waiting lists, which he had feared could hit 13m within three years without remedial action, would be “a lot, lot lower” but he added: “I can’t say exactly how much lower.”
Sir Keir Starmer, Labour leader, will on Wednesday face the challenge of developing a strategy to oppose a tax-and-spend plan which, in other circumstances, might have been proposed by a Labour government.
Torsten Bell, the chief executive of the Resolution Foundation think-tank, told the BBC: “We’ve learnt that low-tax Conservatism is dead. This is the biggest set of tax rises since the 1970s if you take this together with the tax rises in the March Budget.”
FT economics editor Chris Giles’ 2-minute health and social care summary
Boris Johnson moved further on to Labour’s traditional territory with a fully-funded, manifesto-busting tax and spend package to paper over the cracks in the NHS, finance treatment backlogs and fund long-awaited reforms to social care, giving people certainty about how much they will have to pay in future
A big tax and spend package
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The measures were bigger than many Budgets
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£12bn of net annual tax rises to finance equivalent level of new spending
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Manifesto-busting higher national insurance rates
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Funding a big boost to the NHS and social care support
Key numbers
£12bn
New annual tax revenues available to spend
2.5 percentage points
Additional tax on earnings
£12bn
Extra net annual spending
Health is the big winner
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£11.2bn additional spending in 2022-23 across the UK
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Distributed as normal to England, Scotland, Wales and Northern Ireland
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Money to clear backlog of operations and reduce waiting lists
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Provides more secure health funding until 2024-25
Gradual reform to social care system
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Cap of £86,000 on individuals’ social care spending from October 2023
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Provides insurance so people do not have to fear huge bills
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One in seven people face social care costs above £100,000 at age 65
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All costs paid by the state once private assets fall below £20,000
The social care package
£86,000
Cap on personal care costs
£20,000
Level of assets below which all care costs are funded
£100,000
Level of assets below which state starts to help with care costs
The tax rises
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1.25 percentage points on national insurance rates and dividend tax rate
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Employed pensioners will pay the new NICs rates for first time
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All tax rises are to be implemented in April 2022
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Tax increases to be consolidated into a new health and social care levy
