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.
This has made getting final agreement on the reforms more difficult.
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.”
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.
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.”
Food and fashion push retail inflation towards ‘two-year low’
The annual rate of shop price inflation has eased to its lowest level for almost two years, according to an industry reading that credits food and fashion prices.
The British Retail Consortium (BRC)-Nielsen Shop Price Index showed the pace of price increases slowed to 2.5% over the 12 months to February from 2.9% the previous month.
It was the lowest reading since March 2022, the BRC said.
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It was driven by a significant contribution from food, with prices 5% up on a year ago compared with the 6.1% figure registered at the end of January.
The report pointed to price drops for meat, fish and fruit helping fresh food inflation down to 3.4% from an annual rate of 4.9% just four weeks ago.
The BRC credited easing input costs for energy and fertiliser and “fierce” competition for cash-strapped shoppers among retailers.
A separate report by Kantar Worldpanel, which logs supermarket price and sales data, also pointed to an easing in grocery price inflation but it believed food shoppers would be spared a big acceleration in prices ahead.
Its strategic insight director, Tom Steel, said: “Though there’s been lots of discussion about the impact the Red Sea shipping crisis might have on the cost of goods, supermarkets have been pulling out all the stops to keep prices down and help people manage their budgets.
“This month, Morrison’s became the latest retailer to launch a price match scheme with Aldi and Lidl, after Asda made the move in January.
“More generally, we saw promotions accelerate this month after a post-Christmas slowdown. Consumers’ spending on offers increased by 4% in February, worth £586m more than the same month in 2023.”
The BRC pointed out rising costs for things like furniture and electrical goods but extended offers on fashion, to entice spending by customers, during February.
It saw risks ahead to slowing price growth from a series of issues including disruption to shipping in the Red Sea to minimum wage and business rates hikes planned for April.
Helen Dickinson, the BRC’s chief executive, said: “Easing supply chain pressures have begun to feed through to food prices, but significant uncertainties remain as geopolitical tensions rise.
“Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope.
“Domestically, retailers face a major rise to their business rates bills in April, determined by last September’s sky-high inflation rate.
“April’s rates rise should be based on April’s inflation, and the chancellor should use the… budget to make this correction, supporting business investment and helping to drive down prices for consumers.”
Record number of in-store transactions made using contactless
A record 93.4% of in-store card transactions up to £100 were made using contactless in 2023, according to data from Barclays.
The figures are based on Barclays debit card and Barclaycard credit card transactions.
Shoppers made 231 transactions on average, spending an average of £15.69 each time.
This added up to the typical shopper making £3,620 worth of contactless payments over the year.
While contactless is still more popular among younger age groups, the gap between older and younger people using the tech is narrowing, Barclays said.
Last year, the proportion of active users among 85 to 95-year-olds passed 80% for the first time.
And for the third year in a row, the over-65s were the fastest-growing group for contactless usage, Barclays said.
A survey of 2,000 people by Opinium Research for Barclays indicated just 3% of over-75s prefer using mobile payments to physical cards – compared with a quarter (25%) of 18 to 34-year-olds who said they prefer to use their phone.
More than a fifth (22%) of people aged 18 to 34 regularly leave their wallet behind when out shopping in favour of paying with their smartphone, compared with just 1% of over-75s.
Just under a fifth (18%) of people said they struggled to remember their PIN.
For the second year running, the Friday just before Christmas (22 December 2023) was the biggest day for contactless payments, as shoppers picked up last-minute gifts and enjoyed drinks as they clocked off for the holiday.
Karen Johnson, head of retail at Barclays, said: “In 2024, we expect to see a greater shift to payments using mobile wallets, as more bricks-and-mortar businesses integrate the technology into their customer experience.
“Many of our hospitality and leisure clients are finding success by giving customers the ability to order and pay from their table by scanning a QR code.”
‘Real danger’ UK will miss out on economic growth without green plan – CBI economists warn
The UK will “miss out” on economic growth unless it finally comes up with an industrial strategy to green the economy, the leading business group has warned.
As the UK economy has stagnated in recent years, the value of green industries like renewables, eco-friendly heating and energy storage is growing and will help unlock further cash for the UK, according to economists at the Confederation of British Industry (CBI).
They found that while Britain’s GDP growth was stuck at around 0.1% last year, its net zero economy grew by 9%, and attracted billions of pounds in private investment.
It argues private investment is key to unlocking growth.
The UK has committed to reaching net zero by 2050, but the report comes after Labour rowed back on its £28bn green investment pledge, and the Conservatives waged a rhetorical attack on climate policies.
Net zero means almost eliminating greenhouse gas emissions and requires changes to almost every sector, from food to housing, transport to construction.
The businesses implementing these changes – including solar panel installers and green finance advisers – added £74bn in Gross Value Added (GVA) in 2022-23, which is larger than the economy of Wales (£66 billion), according to the CBI Economics report.
But analysts at CBI Economics and thinktank ECIU, which commissioned the report, warned “the strength of future growth is in jeopardy”.
Unless the UK draws up a “Net Zero Investment Plan”, it will lose out to places with larger economies with clear plans, like the US And EU, it said.
Louise Hellem, CBI chief economist, said: “Green growth prizes could deliver a boost of up to £57bn to GDP by 2030, but global competition is heating up.
She added: “If we can’t outspend our international competitors, we need to outsmart them. And the way to do that is really through ambitious policy frameworks that can direct capital into the UK’s green industries.”
Ms Hellem said the UK economy is “well-placed to be a world leader in this space”, given its “unique blend of advanced manufacturing capacity, world leading services industry and energy technical skills”.
“That means that investors do really see opportunities in the UK market.”
‘Real danger’ UK will miss out
Getting to net zero is likely to cost about £10bn a year until 2050, according to the Office for Budget Responsibility, which is roughly equivalent to the annual defence budget, though the majority of the cost is likely to be recouped in savings.
Many technologies that scientists believe are essential to the net zero transition remain extremely expensive, such as hydrogen and carbon capture and storage.
Adam Berman, deputy director of advocacy at industry group Energy UK, said public investment can “de-risk” these technologies and “crowd in” private sector cash, that can then bring down the price.
Jess Ralston from energy thinktank ECIU, said: “The UK is in real danger of missing out on more investment from negative rhetoric and U-turns around net zero, when the EU and US are offering clear plans and are willing to invest themselves.
“Investors want certainty and that comes from long term stable policy – whoever forms the next government will have to remember that, if it wants to see the net zero economy continue to grow.”
Watch The Climate Show with Tom Heap on Saturday and Sunday at 3pm and 7.30pm on Sky News, on the Sky News website and app, and on YouTube and Twitter.
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