PM considering raising National Insurance to fund social care reforms – but proposals won’t come until after summer
Boris Johnson is looking at raising National Insurance in order to fund long-promised reforms of social care, but any proposals won’t be set out until after the summer.
The prime minister‘s plans have been delayed in part because he is isolating along with Chancellor Rishi Sunak and Health Secretary Sajid Javid, after the latter tested positive for COVID-19.
This has made getting final agreement on the reforms more difficult.
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Social care: PM pressured to ‘sort it out’
According to The Times, National Insurance payments for businesses and employees will rise by 1 percentage point, a penny in the pound, to fund the changes.
The move will generate an extra £10bn annually, its report added.
Any tax rise would prove controversial however, as the Conservatives committed in their 2019 general election manifesto not to raise income tax, VAT or National Insurance.
The Sun reported that the prime minister and Chancellor Rishi Sunak are “close” to agreeing the National Insurance rise.
Speaking at a regular Westminster briefing for journalists, the PM’s spokesman did not deny the reports.
“There’s continued speculation but I’m simply not going to be engaged with that speculation,” he said.
“The process for agreeing our proposals is still ongoing. We will set that out before the end of the year.”
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Social care in England is ‘a tower of Jenga’
Speaking on Monday, the PM said it “won’t be too long now” before he lays out his plans for changing the system.
Mr Johnson promised to “fix the crisis in social care once and for all with a clear plan we have prepared” when he addressed the nation outside Downing Street after becoming PM in 2019.
He told a news conference that the issue of what to do with social care had “bedevilled governments for at least three decades”.
“All I can say is we’ve waited three decades, you’re just going to have to wait a little bit longer,” he said on Monday.
“I’m sorry about that but it won’t be too long now, I assure you.”
Speaking to Sky News earlier, business minister Paul Scully said he did not recognise reports about a rise in National Insurance to fund social care.
“Well, I’ve read about the speculation this morning, that’s not something I recognise, so, you know, we’ll see what happens in terms of when we announce our details on social care,” he told Kay Burley.
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Social care: The challenge remains
Mr Scully added: “What we do want to happen is to make sure that we can come up with a comprehensive programme to tackle social care.
“It’s been around for a long time this issue, and we really do need to get to grips with it, and that’s what the prime minister and the health secretary are really determined to do.”
Labour’s shadow economic secretary Pat McFadden said paying for social care must be fair to all income groups and all ages.
“There’s been a social care problem in the country for many, many years. We know we’ve got to fix it, the COVID pandemic has shown us the problems in the system, and we understand that’s got to be paid for,” he said.
“And again, with a tax proposal, which has been briefed to one or two newspapers, the best way to judge it is on two criteria.
“One: does it really fix the problem in social care? And secondly, is it fair to people of all ages, and all income groups?”
Professor Len Shackleton, editorial and research fellow at the Institute of Economic Affairs think tank, said raising National Insurance would be “yet another burden on working age people at a time when jobs are insecure, inflation is rising and wages are squeezed”.
He said: “Much of the public may believe that National Insurance pays for the NHS, and social care would just be a natural addition. But NI is not ringfenced and is simply an income tax by another name, albeit with different exemptions, starting points and arbitrary changes in rates which don’t coincide with tax bands.
“It is wrong to place the burden of this tax squarely on the shoulders of younger workers, without extending NI to post-state pension age taxpayers to help pay.”
The cyber attack on Jaguar Land Rover (JLR), which halted production for nearly six weeks at its sites, cost the company roughly £200m, it has been revealed.
Latest accounts released on Friday showed “cyber-related costs” were £196m, which does not include the fall in sales.
Profits took a nose dive, falling from nearly £400m (£398m) a year ago to a loss of £485m in the three months to the end of September.
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Revenues dropped nearly 25% and the effects may continue as the manufacturing halt could slow sales in the final three months of the year, executives said.
The impact of the shutdown also hit factories across the car-making supply chain.
Slowing the UK economy
The production pause was a large contributor to a contraction in UK economic growth in September, official figures showed.
Had car output not fallen 28.6%, the UK economy would have grown by 0.1% during the month. Instead, it fell by 0.1%.
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How cyber attack ‘effectively hacked GDP’
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Reacting to JLR’s impact on the GDP contraction, its chief financial officer, Richard Molyneux, said it was “interesting to hear” and it “goes to reinforce” that JLR is really important in the UK economy.
The company, he said, is the “biggest exporter of goods in the entire country” and the effect on GDP “is a reflection of the success JLR has had in past years”.
Recovery
The company said operations were “pretty much back running as normal” and plants were “at or approaching capacity”.
Production of all luxury vehicles resumed.
Investigations are underway into the attack, with law enforcement in “many jurisdictions” involved, the company said.
When asked about the cause of the hack and the hackers, JLR said it was not in a position to answer questions due to the live investigation.
A run of attacks
The manufacturer was just one of a number of major companies to be seriously impacted by cyber criminals in recent months.
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Are we in a cyber attack ‘epidemic’?
High street retailer Marks and Spencer estimated the cost of its IT outage was roughly £136m. The sum only covers the cost of immediate incident systems response and recovery, as well as specialist legal and professional services support.
The Co-Op and Harrods also suffered service disruption caused by cyber attacks.
Four people were arrested by police investigating the incidents.
Sir Keir Starmer and Rachel Reeves have scrapped plans to break their manifesto pledge and raise income tax rates in a massive U-turn less than two weeks from the budget.
The decision, first reported in the Financial Times, comes after a bruising few days which has brought about a change of heart in Downing Street.
Read more: How No 10 plunged itself into crisis
I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.
The Treasury and Number 10 declined to comment.
The decision is a massive about-turn. In a news conference last week, the chancellor appeared to pave the way for manifesto-breaking tax rises in the budget on 26 November.
She spoke of difficult choices and insisted she could neither increase borrowing nor cut spending in order to stabilise the economy, telling the public “everyone has to play their part”.
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‘Aren’t you making a mockery of voters?’
The decision to backtrack was communicated to the Office for Budget Responsibility on Wednesday in a submission of “major measures”, according to the Financial Times.
The chancellor will now have to fill an estimated £30bn black hole with a series of narrower tax-raising measures and is also expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.
Tory shadow business secretary Andrew Griffith said: “We’ve had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet – with just days to go – it is clear there is chaos in No 10 and No 11.”
How did we get here?
For weeks, the government has been working up options to break the manifesto pledge not to raise income tax, national insurance or VAT on working people.
I was told only this week the option being worked up was to do a combination of tax rises and action on the two-child benefit cap in order for the prime minister to be able to argue that in breaking his manifesto pledges, he is trying his hardest to protect the poorest in society and those “working people” he has spoken of so endlessly.
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Ed Conway on the chancellor’s options
But days ago, officials and ministers were working on a proposal to lift the basic rate of income tax – perhaps by 2p – and then simultaneously cut national insurance contributions for those on the basic rate of income tax (those who earn up to £50,000 a year).
That way the chancellor can raise several billion in tax from those with the “broadest shoulders” – higher-rate taxpayers and pensioners or landlords, while also trying to protect “working people” earning salaries under £50,000 a year.
The chancellor was also going to take action on the two-child benefit cap in response to growing demand from the party to take action on child poverty. It is unclear whether those plans will now be shelved given the U-turn on income tax.
A rough week for the PM
The change of plan comes after the prime minister found himself engulfed in a leadership crisis after his allies warned rivals that he would fight any attempted post-budget coup.
It triggered a briefing war between Wes Streeting and anonymous Starmer allies attacking the health secretary as the chief traitor.
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Wes Streeting: Faithful or traitor? Beth Rigby’s take
Read more: Is Starmer ‘in office but not in power’?
The prime minister has since apologised to Mr Streeting, who I am told does not want to press for sackings in No 10 in the wake of the briefings against him.
But the saga has further damaged Sir Keir and increased concerns among MPs about his suitability to lead Labour into the next general election.
Insiders clearly concluded that the ill mood in the party, coupled with the recent hits to the PM’s political capital, makes manifesto-breaking tax rises simply too risky right now.
But it also adds to a sense of chaos, given the chancellor publicly pitch-rolled tax rises in last week’s news conference.
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