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.”
Donald Trump has threatened to impose a 50% tariff on the EU, starting from next month, after saying that trade talks with Brussels were “going nowhere”.
Mr Trump made the comments on his Truth Social platform.
It marks a fresh escalation in his trade row with the European Union, which he has previously accused of being created to rip off the US.
While the US has done deals with the UK and China to reduce their peak exposure to his trade war, the president’s EU threat, which would cover all EU imports to the US, would risk retaliatory measures from Brussels if carried through.
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Mr Trump said of talks between his administration and the EU: “Our discussions with them are going nowhere! “Therefore, I am recommending a straight 50% tariff on the European Union, starting on June 1, 2025. There is no tariff if the product is built or manufactured in the United States.”
The European Commission was yet to respond to the remarks. Officials signalled there would be no comment until after a call between top US-EU trade figures due later on Friday.
Financial markets, however, were quick to take a view. European stock markets were sharply down across the board.
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Explained: The US-UK trade deal
The FTSE 100 in London was more than 1.2% lower shortly after the Truth Social post appeared, while Germany’s DAX and the French CAC 40 were in the red to the tune of more than 2%.
US stock markets fell at the open on Wall Street. The tech-focused Nasdaq was down more than 1%.
The potential for damage to the global economy saw Brent crude oil sink by more than 1% to $63 a barrel.
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‘US is losing’ trade war
The dollar took a hit too, as the news only intensified existing market worries this week about the sustainability of US government debt levels.
The pound was trading at levels last seen in February 2022.
Mr Trump said earlier that Apple will be forced to pay 25% tariffs on its iPhones unless it moves all its manufacturing to the US.
Apple shares dropped more than 2% in premarket trading after the warning, also posted on Truth Social.
“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or any place else,” wrote the president.
“If that is not the case, a tariff of at least 25% must be paid by Apple to the US.”
Production of Apple’s flagship phone happens primarily in China and India, which has been an issue brought up repeatedly by Mr Trump.
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On Thursday, the Financial Times reported Apple was planning to expand its India supply chain through a key contractor.
Taiwanese company Foxconn is planning to build a new factory in the Indian state of Tamil Nadu, according to the paper, to help supply Apple.
Sky News has contacted Apple for comment.
Business
Trump’s latest phone negotiation tactic on tariffs likely to heighten EU retaliation threat
President Trump’s Friday flurry of pronouncements marks the return of negotiation by smartphone and may trigger another period of profound uncertainty for international trade and financial markets.
The threat of 50% tariffs against the European Union, issued hours before his trade representative met their European counterparts, is a show of presidential muscle surely designed to strongarm those on the other side of the table.
It is an escalation likely to heighten the threat of retaliation from Europe, and with a few keystrokes ends the brief period of calm that had returned to global trade and markets in recent days.
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A red hat in Washington DC to support President Trump. Pic: AP
Talks in Switzerland between US and Chinese delegations a fortnight ago took the sting out of Sino-American hostility, negotiating three-figure tariffs that amounted to a mutual trade embargo down to manageable levels.
Financial markets had regained most of the losses sparked on ‘Liberation Day’ in April, when Donald Trump declared total trade war, and there was optimism that for all his bluster, there might be meaningful room for constructive compromise.
The UK even secured a deal of sorts, securing a reduction in auto tariffs in exchange for a reciprocal opening of agricultural markets.
There will be no such deal for the EU in a hurry. A 50% tariff on all exports to the US is not only higher than the original threatened blanket tariff of 20% and double Mr Trump’s proposed 25% on European cars, it’s higher even than China.
European stocks predictably ended the week in decline, with car manufacturers including BMW, Volkswagen and Stellantis all down.
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12 May: US and China reach agreement on tariffs
It remains to be seen whether this threat will stick.
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Mr Trump has repeatedly blinked first in the trade war he started, backing down on global reciprocal tariffs when bond markets rebelled before caving in Geneva to reach an accommodation with China.
His grievances with Europe appear to have an extra edge however, and the consequences of the uncertainty he’s sparked will be far-reaching.
If this was the only thing he had announced on ‘Liberation Day’ it would still have been huge.
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