UK social care updates
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Boris Johnson faces one of the toughest fights of this Parliament to persuade his Tory party to back plans for the biggest overhaul of UK social care in a generation when MPs return this week after the summer break.
The prime minister faces a powerful coalition opposed to his plan to use an increase in National Insurance to pay for billions of pounds of spending on the care home system — breaching his own 2019 election manifesto promise.
Opponents include cabinet ministers, Conservative MPs, the Labour party, the Trades Union Congress, several business groups and elements of the Tory media.
Johnson and chancellor Rishi Sunak are expected to set out the plans on Tuesday, involving an increase of about 1 percentage point on both employer and employee national insurance contributions (NICs) to raise about £10bn a year.
The proposals are controversial because the Conservative 2019 election manifesto promised not to increase national insurance, income tax or value added tax. Critics also argue that an increase in NICs would fall heavily on workers while not being paid by pensioners.
In a barely coded warning, Jacob Rees-Mogg, the leader of the House of Commons, used a column in the Sunday Express to remind readers of the fate of former US president George Bush after he broke his “read my lips, no new taxes” pledge in the 1988 presidential election. “Voters remembered these words after President Bush had forgotten them,” Rees-Mogg wrote.
Other cabinet ministers thought to be concerned about the policy include Liz Truss, trade secretary, while Sunak is understood to have misgivings about the cost.
Lord Philip Hammond, a former chancellor, told Times Radio on Sunday he thought raising NICs would “cause the government — the Conservative party — significant damage” and was also “the wrong thing to do”.
“It’s not just about party political advantage,” he said. “Economically, politically, expanding the state further in order to protect private assets by asking poor people to subsidise rich people has got to be the wrong thing to do.”
Sir John Major, the former prime minister, told the FT Weekend Festival on Saturday that the plan was “regressive”.
Suren Thiru, head of economics at the British Chambers of Commerce, said the tax rise would hit the ability of companies to generate prosperity and create jobs. “Businesses would strongly oppose a rise in national insurance contributions as it would represent a drag anchor on jobs growth at an absolutely crucial time,” he said.
Mike Cherry, chair of the Federation of Small Businesses, said the policy would be “devastating” for small businesses trying to get back on their feet.
While pensioners will not be hit by an increase in NICs, Johnson will argue that they will have to make sacrifices elsewhere.
The prime minister is expected to break a second manifesto pledge on the same day by suspending the pensions “triple lock” under which pensions increase by the highest of either inflation, wages or 2.5 per cent.
On account of a statistical quirk — because of workers returning from furlough — wages jumped 8.8 per cent over the past year, which would mean a £4bn increase in spending on pensions.
Sunak is expected to say that he is temporarily replacing the triple lock with a new “double lock”, either inflation or 2.5 per cent, because of the freak data.
A further complication is that NHS chiefs are demanding another £10bn a year to tackle the treatment backlog that has built up during the pandemic, with 5.45m people on NHS waiting lists. It is possible that revisions by the Office for Budget Responsibility, the fiscal watchdog, to economic forecasts could give Sunak more fiscal room for manoeuvre to pay for this.
Johnson is expected to argue that the rise in NICs will finally provide a solution to the overwhelming care home crisis in England caused by people living longer with higher levels of chronic medical conditions.
An official report by economist Sir Andrew Dilnot 11 years ago suggested a “cap and floor” system with lifetime individual contributions to care capped at £35,000 — a suggestion he has since lifted to £50,000.
The Treasury has pushed for contributions to be capped at closer to £80,000 to limit the cost of the new system.
Ministers could also lift the “means-test threshold” at which people no longer become eligible for state-funded residential care, which is currently £23,250.
Johnson is facing separate attacks from the left, with Frances O’Grady, head of the Trades Union Congress, arguing that wealth taxes would be a fairer way to pay for the new social care system.
