Boris Johnson unveils £12bn annual tax rise for health and social care
Boris Johnson on Tuesday announced a £12bn annual tax rise to fund a big increase in health and social care spending in England, breaking a core manifesto pledge in a defining moment for his premiership.
Rather than adhering to the traditional Conservative claim to be the party of low taxes, Johnson defended the tax hike and pronounced to cheers from Tory MPs: “We are the party of the NHS.”
Conservative MPs and ministers had railed against the planned rise in national insurance rates ahead of Tuesday’s announcement, but around the cabinet table and in the House of Commons Tory opposition was muted.
Johnson, whose government broke two manifesto promises in a single day, will try to ram home his political advantage by putting the health and social care package to a Commons vote on Wednesday.
“A global pandemic was in no one’s manifesto,” he told MPs, as he announced £25bn for NHS England, almost £5bn for healthcare in the devolved nations and £5.3bn for social care, over the next three years.
Johnson said more money will be released for social care in future years as the costs of reforms build up, but some Treasury officials fear that the NHS will end up consuming most of the new tax revenue.
Johnson said the “tough decision” to raise taxes was needed to contain a mounting waiting list crisis in hospitals and to carry out long-promised reforms to the country’s crumbling care sector.
The plan to increase national insurance contributions (NICs) by 1.25 percentage points of salary for both employers and employees breaches Johnson’s election “guarantee” that he would not put up key taxes. Working pensioners will also pay the levy.
The move, which takes effect from April 2022, will be accompanied by a 1.25 percentage point rise in taxation of dividend income — a move intended to share the burden more widely to include better off households.
Johnson said that money from the higher national insurance rates, rebranded a “health and social care levy”, would be protected for that specific purpose and would appear as a separate line on payslips.
Separately, Therese Coffey, work and pensions secretary, announced a one-year suspension of the pensions “triple lock” to avoid a big state pension increase next year. The move breaches another manifesto promise.
Wage anomalies caused by Covid — to which pension increases would otherwise have been linked — would have seen pensions rise by more than 8 per cent next year, at a recurring cost to the Treasury of £4bn a year.
Instead pensions are expected to rise next year by almost 3 per cent, in line with inflation. Coffey said the “triple lock” would be restored after next year for the rest of the parliament.
Johnson, buoyed by opinion polling suggesting the public is prepared to pay more in tax for better hospital and care provision, pressed ahead with the plan despite widespread Tory opposition.
Jacob Rees-Mogg, leader of the House of Commons, warned this week that Johnson risked a “read my lips” moment — a reference to President George HW Bush’s infamous broken promise of no new taxes.
But government officials said that in cabinet on Tuesday only two rightwing ministers — Rees-Mogg and Liz Truss, trade secretary — raised concerns about the further erosion of the Conservatives’ low tax heritage.
Most of the money raised by the NICs rise will initially fund attempts to cut the NHS treatment backlog; Sajid Javid, health secretary, has warned that the current waiting list of 5.5m patients could rise to 13m without action.
Frances O’Grady, head of the Trades Union Congress, said the amount of money being made available for social care was “deeply disappointing”, with “vague promises” of more money in future.
Martin Green, chief executive of Care England, which represents care home operators, welcomed the announcement and said it was “essential that money reaches the frontline”.
“Recruitment and retention of workforce, our best resource, is the most urgent issue at present and it is vital that any long term plans can be brought into play alongside immediate measures.”
At the heart of the social care plan is an £86,000 cap on the amount any individual can pay, a move that Johnson argues will remove the need for people to sell their homes to pay for residential care.
“It’s awful, it’s terrible, it’s shocking,” fumed one backbench Conservative MP. “What the government is doing is extraordinarily bad policy.” But in the Commons chamber, only a handful of MPs criticised the plan.
Johnson said the higher taxes would fund wider reform to social care and also extend state help to more people. Currently anybody with assets of more than £23,250 does not qualify for state help but the system will be reformed to be more generous.
In future anyone with assets or savings worth less than £20,000 will receive full state support. However, people with savings worth between £20,000 to £100,000 will receive tapered help with their care costs up to the £86,000 cap.
Johnson declined to assert his promise that nobody would have to sell their house to fund their care. He hoped that financial services companies would sell insurance to cover future risks.
Conservative ministers have now taken to describing the Tories as a party of “fair taxation”, reflecting the fact that the overall tax burden as a share of national income is at its highest since the late 1960s.
Rishi Sunak, chancellor, insisted that additional spending on social care would have to be funded by higher taxes rather than more borrowing; national debt currently stands at about 100 per cent of gross domestic product.
The Commons vote on Wednesday paving the way for the tax rises is being forced through at breakneck speed, with potential rebels being warned to take care because a ministerial reshuffle could be in the offing.
Downing Street officials insisted there were “no plans” for a ministerial shake-up. But another senior official said “I’m increasingly confident it’s happening.” Some ministers have cleared their diaries for Thursday.
Additional reporting by Gill Plimmer
—