Social care reform: Boris Johnson in £36bn tax hike gamble


oris Johnson has taken a £36 billion gamble with a manifesto-busting tax hike to boost the Covid-hit NHS and fix Britain’s social care crisis.

After the first face-to-face Cabinet meeting this year, the Prime Minister unveiled in the Commons his long-awaited blueprint to stop so many pensioners being left with poor care in their old age.

  • A new, UK-wide 1.25 per cent Health and Social Care Levy, based on National Insurance Contributions, will be introduced from April 2022.
  • To ensure fairness, all working adults, including those over the state pension age will pay the levy.
  • The rates of dividend tax will also increase by 1.25 per cent, broadening the type of incomes which will fund the plan,
  • The highest earning 14 per cent of people are expected to foot about half the bill.
  • The proposals aim to raise an additional £12 billion per year, to be invested in frontline health and social care across the UK over the next three years, to ensure the NHS can recover from Covid and the health and care system has the long-term resources that it needs.
  • A cap will be imposed so no-one in England will have to pay more than £86,000 in care costs over the course of their lifetime, equivalent to about three years in care.
  • People with assets between £20,000 and £100,000 will be expected to contribute to the cost of their care but will also receive means-tested state support.
  • The new £100,000 limit is over four times higher than the current limit of £23,250, so many more people will now be eligible for support.
  • The health service will be ramped up to operate at 110 per cent capacity by 2023/24 to tackle a backlog in treatments and appointments of more than five million which ministers admit will get worse before it gets better, with warnings that it could hit 13 million by the end of this year.

However, many Tory MPs fear that the extra billions earmarked for social care will still be needed in future years for the health service.

Health minister Nadhim Zahawi stressed the increase in National Insurance contributions for millions of workers would allow the Government to “have a really good go” at addressing the dire situation which is leaving many people with poor care in their old age.

But he stopped short of saying the deeply controversial move, which is being opposed by a number of Tory MPs, would definitely tackle the crisis.

His admission came as leading economists said London and the South-East would bear the brunt of the expected tax grab by the Treasury to raise around £12 billion, which would be earmarked for social care in future years.

The capital would pick up about 20 per cent of the bill, for a straightforwards NICs rise, but only accounts for 13 per cent of households in the UK, with the South-East having to pay 24 per cent, with 19 per cent of households.

Tom Waters, senior research economist at the IFS, said: “Since earnings are higher in London than elsewhere, Londoners are on average hit by more from a NICs rise than those in any other regions.”

Mike Brewer, of the Resolution Foundation, said: “While Londoners’ higher earnings mean they will pay more towards the funding of social care, the proposed cap on care costs means their assets will be protected too. But it is the intergenerational unfairness of a National Insurance rise, which asks young low earners to pay over £100 a year more while many rich pensioners pay nothing, that will grate most among the capital’s relatively youthful population.”

Many Tory MPs are not only concerned about breaking a flagship manifesto commitment to not raise several taxes, including National Insurance, but also are worried that the Government’s blueprint will not actually solve the social care crisis.

Damian Green, former de-facto deputy prime minister, told the Standard: “My fear is the Government will think it has solved the social care crisis with this but actually all the money will be absorbed by the NHS. I would urge the Government to find other ways to raise the money.”

Former chief whip Mark Harper told Talk Radio: “It’s not just about the money, it’s what you get for the money. I want to see what the actual plan is to deal with social care.”

He said that National Insurance was not the “ideal” way to raise money as it “bears more heavily on young people and older people don’t pay it.”

Tobias Ellwood, Tory chairman of the Commons defence committee, said that the Conservative Party had got itself into a “quagmire” over breaching manifesto commitments which risked undermining voters’ trust, first on international aid and now on raising taxes to pay for the social care funding black hole.

He added that many Conservative MPs had hoped to see a “Conservative” solution to the social care funding crisis rather than solely relying on tax rises.

He said the Government should look to introduce a scheme similar to auto pension enrolment which requires every employer in the UK to put certain staff into a workplace pension scheme and contribute towards it.


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