Ministers faced a furious backlash over plans for a £10billion ‘jobs tax’ to pay for social care last night as it emerged it may not even help the struggling sector for another two years.
Boris Johnson, Chancellor Rishi Sunak and Health Secretary Sajid Javid will thrash out proposals this weekend aimed at finally ending the scandal that forces thousands to sell their homes to pay for care.
But the reform will come at a high cost with both business and workers facing a tax rise of at least 1 per cent in national insurance contributions.
Boris Johnson, Chancellor Rishi Sunak and Health Secretary Sajid Javid will thrash out proposals this weekend aimed at finally ending the scandal that forces thousands to sell their homes to pay for care
The NHS waiting list has reached a record 5.45million and Mr Javid has warned it could reach 13million unless more resources are pumped in
The move drives a coach and horses through the Prime Minister’s manifesto pledge not to raise the headline rate of income tax, national insurance or VAT during this parliament.
Last night it divided Tory MPs with some Cabinet ministers privately warning against the move by describing it as ‘a drag anchor on jobs and growth’.
And the Mail can also reveal that the money raised will initially be used to clear the huge NHS waiting list built up during the pandemic – meaning that more cash may not flow into the struggling social care sector for another two years.
The NHS waiting list has reached a record 5.45million and Mr Javid has warned it could reach 13million unless more resources are pumped in.
Bid to end two-tier bills
By Jason Groves
Ministers are to pour hundreds of millions of pounds into improving social care as part of the new reform package.
Sources said ministers were close to agreeing a deal that would ‘equalise’ the money paid to care homes by private and council-funded residents.
At present, privately-funded residents pay an average 40 per cent more for a place than one paid for by a local authority. It is understood the Government will provide councils with the funding to match that – effectively pumping billions of pounds into the system.
This will end an anomaly that has led to claims middle-class residents effectively subsidise those with no assets who are funded by councils. A study by the Competition and Markets Authority in 2017 revealed the excess paid by privately-funded residents amounted to £1billion. It also found council contributions had been squeezed so hard that dozens of care homes were at risk of going bust.
Ministers believe pumping extra cash into the system is essential to drive up standards in a sector bedevilled by low wages and staff shortages.
But the plan will eventually deliver on the PM’s election promise to end the care lottery that forces thousands to sell their homes in later life, resolving an issue that has bedevilled successive governments for decades.
The PM’s plan will impose a ‘cap’ on the total amount people will have to pay for their own care. Mr Johnson had initially wanted to set the cap at £50,000 but following pressure from the Treasury it is now likely to be significantly higher – at £60,000 or even £80,000.Bid to end two-tier bills
Ministers will also bring in an increase in the so-called ‘floor’ when state care funding kicks in.
Currently anyone with assets of more than £23,250 is not eligible for any state help with costs.
The proposal is also expected to equalise the costs paid by private and state-funded care home residents. Currently private residents pay an average 40 per cent premium – leading to claims the middle classes are cross-subsidising the care of those on lower wages.
But it is understood ministers will pump in billions extra to the fees paid by local authorities in order to improve care standards and conditions.
Downing Street is braced for a backlash over the planned tax rise with insiders acknowledging it will be ‘a hard sell’. A 1 per cent rise in national insurance would see someone earning £20,000 pay an extra £104 a year in tax, while someone on £60,000 would pay an extra £504.
One Cabinet minister told the Mail: ‘Breaking a manifesto pledge on tax will come back to haunt us.’ While former cabinet minister Sir John Redwood said: ‘It’s taxing a lot of people including younger and lower-paid people… I don’t think there’s a good moral case for that and there’s certainly not a good economic case for it.’
Suren Thiru at the British Chambers of Commerce said businesses would oppose a rise in national insurance as it would ‘represent a drag anchor on jobs growth at an absolutely crucial time’.
How cruel to put the biggest burden on the young
Commentary by Alex Brummer
The worst possible way for Boris Johnson’s government to deal with the problem of providing high-quality, long-term social care is a short-term fix of taxing jobs and enterprise through a savage hike in National Insurance Contributions (NICs).
After all, when Labour, under Tony Blair, first identified the evolving funding gap for social care nearly two decades ago, it was immediately recognised as an issue that required permanent solutions, not higher taxes.
Not only does the proposed tax move breach Tory manifesto promises not to raise NICs. But any such increase would be completely unfair – since the largest burden would fall on younger citizens, many decades away from needing such care themselves.
The lifetime cap of £25,000 to £50,000 on personal contributions to social care costs (more like £100,000 in today’s money at the top end)
Even worse, the current workforce and businesses would be paying the price for long-term government neglect without reaping any benefits for themselves.
It is also out of keeping with the Thatcherite and post-Brexit ideal of a low tax, free market economy capable of competing across the globe.
And let there be no doubt, even if the new tax is described as a ‘health and social care levy’, the £10bn or so of revenues collected will drop straight into the Exchequer’s ‘Consolidated Fund’ in the same manner as other taxation such as VAT and petrol duties.
The UK has no history of hypothecated taxes – separate pools of taxation for particular expenditure. Even the generous pension arrangements for state employees come straight out of the pockets of all taxpayers.
The only way in which the likely one per cent surcharge on employee and employer National Insurance now being discussed could possibly be justified is if it was a very short-term fix for the post-Covid era.
It would then be axed if an alternative, such as an ‘automatic enrolment’ plan for social care – funded in a similar way to private sector pensions –were to be phased in over the next several years.
Atax increase now, as a ‘bridge’ until assets in the new fund build up, would be acceptable – temporarily.
But even this is highly risky for citizens in that temporary taxes to deal, for example, with a particular need such as an overseas conflict, have a nasty habit of becoming permanent.
As someone who, in recent years, has had direct experience of both social care in the home and of care homes for parents and elderly relatives I have nothing but the highest praise for the hard-working, overstretched and often poorly paid social and care workers who deliver the services.
But in a civilised society, having to sell a family home that was scrimped and saved for over a lifetime to pay for the occupants’ declining years, should never be an option. Yet, for too many, it is the only option.
The lifetime cap of £25,000 to £50,000 on personal contributions to social care costs (more like £100,000 in today’s money at the top end) – proposed by the independent commission headed by Sir Andrew Dilnot in 2011 – would at least ensure that most of the assets built up through hard work and out of after-tax income do pass on to future generations.
In my view, there could not be a worse time for the Government to ask employees and businesses to absorb a tax increase. The jobs market is already in chaos as the Covid furlough schemes are unwound. Raising National Insurance, effectively a tax on jobs, will not encourage people who have dropped out of the workforce to return.
At the end of last year, some 88 per cent of employees were participating in the workplace scheme, the highest level of provision in the UK’s history
Moreover, the Government is already committed to raising corporation tax (the charge on company profits) to pay for the pandemic.
Any further tax increases would stifle enterprise, entrepreneurship and investment –the core values of any Conservative government.
This newspaper has long advocated the creation of a social care fund into which all employees of all ages are enrolled, similar to that for workplace pensions.
At the end of last year, some 88 per cent of employees were participating in the workplace scheme, the highest level of provision in the UK’s history. Some £90billion and rising is being paid into the system each year.
Under such a plan for social care, each participant (as with pensions) would have their own personal account which would be managed in the private sector without the dead hand of government.
Ministers will no doubt claim that they had no other choice but to raise NICs to meet the shortfall for social care. That is disingenuous. They should have started by banking inefficiencies in the £212billion-a- year of NHS spending.
Courage and imagination – not new taxes – are what is needed to come up with a genuine social care market fix to deal with the needs of an ageing population once and for all.