National Insurance contributions will rise by 1.25% to pay for the social care system in England in a bid to end the “unpredictable and catastrophic costs” faced by many.
A social care package, which the prime minister has called “the biggest catch-up programme” in the NHS’s history, will be funded through a new, UK-wide 1.25% ‘health and social care levy’ from April 2022.
The plan was signed off by ministers at a Cabinet meeting earlier after days of fury from Tory backbenchers.
The levy is expected to raise about £12bn which, in the early years, will mainly be used to fund dealing with the NHS backlog.
This includes £2.2 billion a year for Scotland, Wales and Northern Ireland, as tax changes affect the whole of the UK.
Announcing the plans in the Commons, Prime Minister Boris Johnson said the costs of the programme will be split between individuals and businesses and “those who earn more will pay more”.
From October 2023, anyone with assets under £20,000 have their care costs fully covered by the state, while those with between £20,000 and £100,000 will be expected to contribute to their costs but will also receive state support.
He added that there will be a cap of £86,000 on what people will be asked to pay over their lifetime for care.
The increase will be used exclusively on health and social care, and will raise £36 billion over the next three years, the PM said.
He told MPs the measures will cap COVID backlogs in hospitals by increasing hospital capacity “to 110% and enabling 9 million more appointments, scans and operations”.
“As a result, while waiting lists will get worse before they get better, the NHS will aim to be treating around 30% more elective patients by 2024-2025 than before COVID, the PM said.
Mr Johnson said he accepts that the measure breaks a Tory manifesto pledge not to hike national insurance, but that it was a necessary move due to COVID financial pressures.
“No Conservative government wants to raise taxes, I will be honest I accept this breaks a manifesto commitment. It is not something I do lightly but a global pandemic wasn’t iin anyone’s manifesto,” the PM told MPs in the Commons.
“This is the right the reasonable and the fair approach. I think the people of this country understand that in their bones and they can see the enormous steps that this government and the Treasury have taken.”
The PM’s official spokesperson said the change will make “the system fairer for all” and noted that working adults above pension age will also contribute to the new levy.
“The levy will be paid by working adults including those over the state pension age. From April 2022, while systems are being updates NICs rates will rise by 1.25%,” the spokesperson told reporters on Tuesday.
“Then, from April 2023, once systems are updated, the levy will be separated and the exact additional amount each employee is paying through the levy will be visible as a separate line on an individual’s payslip.
“It is at this point that working adults above pension age will contribute to the levy.
“Individuals will contribute according to their means and those who earn more will pay more.
“A typical basic rate tax payer earning £24,100 will contribute £180 – that’s £3.46 per week. A typical higher rate tax payer earning £67,100 – the top 15% of earners – will contribute £7.15.”
Referring directly to those who have opposed the national insurance hike and suggested income tax should be raised instead, the PM said this would not generate the same amount.
The PM also announced that there will be a 1.25% hike in the amount of tax that is paid on income from share dividends to help cover the costs of the social care package.
Labour leader Sir Keir Starmer asked if the PM’s new plan will still lead to people selling their homes to fund care.
“The blunt and uncomfortable truth is that under the prime minister’s plans the quality of care received will not improve – there is no plan for that, people will still go without the care that they need – there is no plan for that, unpaid family carers will still be pushed to breaking point – there is no plan for that, working-age adults with disabilities will have no more control under their lives – there is no plan for that, pay and conditions will not improve for care workers – there is no plan for that,” he told the Commons.
“Let me spell that out – a poorly-paid care worker will pay more tax for the care that they are providing without a penny more in their pay packet and without a secure contract.”
Labour’s deputy leader Angela Rayner tweeted: “This is not a plan to fix social care. Describing it as such is an insult to everyone who works in social care and everyone who relies on social care.”
