Ministers consider an increase in national insurance to finance social care Social protection
Ministers are considering an increase in national insurance – described as a social care and health tax – to overhaul the UK’s welfare system, as Boris Johnson has refused to re-commit to the Tory manifesto promise not to raise taxes.
The Prime Minister declined to reaffirm the commitment not to raise income tax or national insurance when asked about plans to raise taxes at the Downing Street press conference on Monday. Johnson hinted that an offer proposal was imminent, saying: “It won’t be too long, I assure you,” although sources in Whitehall have suggested no deal has been reached.
No 10 and the Treasury have also considered plans to raise income taxes for those over 40, but a government source said plans have drifted away in recent days due to fears. that the increase is not substantial to cover costs.
Rishi Sunak is said to have made it clear that any potential tax hikes must be agreed and announced along with the new care costs policy, which may include a lifetime cap at a level yet to be agreed. A Whitehall source said this made it less likely that the deal could cross the line before the summer recess.
Former Health Secretary Jeremy Hunt on Monday backed an income tax hike, which he called a health and care premium, saying a 1% increase would generate £ 6bn of income that would help cope with catastrophic hospital backlogs and other health care needs.
Sources in Whitehall have suggested ministers lean towards an increase in national insurance, but either would violate the spirit of the Conservative manifesto promise of ‘triple tax lockdown’, although the name change can help sell the police to MPs.
Raising national insurance by 1p for employees and the self-employed would raise around £ 6 billion a year, according to the Resolution Foundation’s calculations.
Hunt, who chairs the health select committee, said there was “a growing awareness that with the Covid backlog, we will never get the NHS back on its feet without social care reform.”
He said there were other options for raising funds for the chess board but none were particularly acceptable. The concept of a social protection precept already exists for the housing tax, with local authorities authorized by the Treasury to use it to raise funds. Hunt said removing the cap was a possibility, but said “soaring municipal tax bills to pay for social care” would affect public support.
He said removing the exemption for retirees from paying national insurance would be unpopular and only bring in half a billion pounds a year.
“The appeal of a health and social services tax is that it would fund the NHS backlog in the short term and desperately needed improvements to the welfare system in the medium to long term,” Hunt tweeted. “It would also be transparent about the need for resources and capacities in both sectors.
“A health and care premium is the most honest solution, with a sane debate on whether we are going to fund new dementia drugs on the way, make our cancer survival rates as good as Denmark / Australia – and adequate social protection – and how much it is about funding [versus] innovation / efficiency.
A source close to the discussions said that increasing national insurance would put the government at risk of being accused of imposing a penalty on young workers, and particularly those on low incomes. “It’s certainly on the table, but it targets those hardest hit by the pandemic,” the source said.
The Treasury has traditionally opposed mortgaged taxes, where tax increases are announced with revenues determined for a specific department, but Sunak would be willing to mark any increases meant to combat social care.
Sources from Treasury and Number 10 said there was still no timeline for the announcement, which was widely expected this week, only promising that a plan would be in place by the end of the year. .
Torsten Bell, Managing Director of the Resolution Foundation, said: “Tax increases will be needed to provide decent social care, but an increase in national insurance is a terrible way to raise the necessary funds. It is a tax that weighs disproportionately on young and lower paid workers, compared to a fairer increase in income tax.
“Why we would target a tax hike on the groups that have been hit hardest by the economic impact of this pandemic, while exempting the elderly and wealthy, is completely beyond me. “