Boris Johnson has confirmed his government will impose a manifesto-busting £12bn-a-year package of tax increases from next April to tackle NHS Covid backlogs and overhaul social care. The cabinet signed up on Tuesday morning to a controversial 1.25 percentage point increase in national insurance contributions, which will be levied on employers and employees.
Tax on share dividends will also be increased by 1.25 percentage points, in a move expected to raise £600m. Much of the revenue initially will be devoted to cutting waiting lists in the NHS, with social care receiving only £5.3bn of the £36bn expected to be raised over the next three years. From 2023-24, once HM Revenue’s computer systems have been updated, the NICs increase will be rebadged as a health and social care levy, which will appear as a separate line on payslips.
It will be extended at that point to cover pensioners who are still in work, and the proceeds hypothecated – put into a separate pot by law. Over time, a growing proportion of the revenue raised will go to social care, allowing the government to implement a new cap on total care costs, so that no individual will have to pay more than £86,000 over their lifetime. Anyone with under £100,000 in savings will receive some state help under the new system – with care funded completely by the state for those with less than £20,000.
The prime minster said the plan would relieve people of the fear of “financial ruin” from “catastrophic” care costs. He told a Downing Street news conference that no Conservative government wanted to raise taxes but said the costs could not have been met through borrowing. “Everyone knows in their bones that after everything we have spent to protect people through that crisis we cannot now shirk the challenge of putting the NHS back on its feet,” Johnson said. While the new social care cap will apply only to patients in England, the levy will apply across the UK. The government said health services in Scotland, Wales and Northern Ireland would receive an extra £2.2bn a year. The leader of the House of Commons, Jacob Rees Mogg, announced that MPs will be given a vote on the proposals on Wednesday, with the government keen to secure the agreement of its backbenchers before the party conference season kicks off later this month.
The health secretary, Sajid Javid, is expected to set out further details of how the money will be spent in the NHS and social care systems, which the government says will become more closely integrated. The money is intended to fund a further 9m procedures in the NHS, and allow the health service to operate at 110% of planned activity levels by 2023-24 in an effort to tackle the historic backlog of cases after the Covid crisis. Johnson acknowledged he was breaking the pledge made during the 2019 general election not to raise VAT, income tax or national insurance. “It breaks a manifesto commitment, and I do not do that lightly; but a global pandemic was in no one’s manifesto,” he said. He said a white paper would be published later this year, with more details of how social care and the NHS will be more closely integrated, and the proposals would ensure that “people get the care that they need, in the right place and at the right time”. Analysis by the Institute for Fiscal Studies suggests the tax increase, together with rises in corporation tax already announced by the chancellor, Rishi Sunak, will take the tax burden to its highest ever sustained level. The Labour leader, Keir Starmer, responding to Johnson, claimed many of the problems in the NHS and care system had existed before the pandemic and accused him of “putting a sticking plaster over a gaping wound”. The decision to break an explicit manifesto promise has sparked a backlash among Tory MPs, while Labour has pointed out the impact of NIC increases would be borne by younger, low-income workers. Johnson believes voters will accept the tax increase because of the backdrop of the pandemic. The government was keen to stress that the national insurance increase was progressive, hitting higher earners harder, and with more than 6 million of the lowest earners exempt. The decision to charge the levy to working people of pension age is aimed at addressing the perception that older people will not be paying their share. Conservative MPs could be asked to vote on the proposals as soon as this week, with the government keen to resolve it before the Commons breaks for the annual party conferences in a fortnight.