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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.

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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.”

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Bonuses to rise for Ryanair staff spotting oversized baggage

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Bonuses to rise for Ryanair staff spotting oversized baggage

Ryanair staff are to get more money for spotting and charging for oversized baggage, the company’s chief executive has said.

Michael O’Leary said he made “absolutely no apology” for catching people who are “scamming the system”.

The reward for intercepting passengers travelling with bags larger than permitted will increase from €1.50 (£1.29) to €2.50 (£2.15) per bag in November, and the monthly €80 (£68.95) payment cap will be scrapped, Mr O’Leary said.

At present, the budget airline allows travellers a free 40cm x 30cm x 20cm bag, which can fit under the seat in front, and charges for further luggage up to 55cm x 40cm x 20cm in size.

Customers face fines of up to £75 for an oversized item if it is brought to the boarding gate.

“I make absolutely no apology for it whatsoever”, Mr O’Leary said.

“I am still mystified by the number of people with rucksacks who still think they’re going to get through the gate and we won’t notice the rucksack”, he added.

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Around 200,000 passengers per year are charged bag fees at airport gates.

“We have more work to do to get rid of them”, Mr O’Leary said.

“We are running a very efficient, very affordable, very low-cost airline, and we’re not letting anybody get in the way.”

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The airline does not support a European Union proposal to ensure customers get a free cabin bag, he said.

Air fares

After a 7% fall in air fares for the year to 31 March, Mr O’Leary said he expected ticket prices to go back up this financial year.

“We expect to get most of last year’s 7% decline, but not all,” he told reporters in a news conference.

“We have sold about 70% of our September seats, but we have another 30% to sell, and it’s those last fares, what people pay for all those last-minute bookings through the remainder of September, that will ultimately determine what average airfares are.”

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Energy price cap: Government costs to raise bills from October

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Energy price cap: Government costs to raise bills from October

A larger than expected hike in the energy price cap from October is largely down to higher costs being imposed by the government.

The typical sum households face paying for gas and electricity when using direct debit is to rise by 2% – or £2.93 per month – to £1,755, the energy watchdog Ofgem announced.

The current price cap is £1,720 a year. A 1% increase had been widely forecast.

The latest bill settlement, covering the final quarter of the year until the next price review takes effect from January, will affect around 20 million households.

Money latest: Should I fix? Reaction to energy price cap shift

There are 14 million others, such as those on pre-payment meters, who will also see bills rise by a similar level.

Those on fixed deals, which are immune from price cap shifts until such time as the term ends, currently stands at 20 million.

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Wholesale prices – volatile since Russia’s invasion of Ukraine back in February 2022 – have been the main driver of rising bills.

But they are making little contribution to the looming increase.

Ofgem explained that government measures, such as the expansion of the warm home discount announced in June, were mainly responsible.

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Bills must rise to pay for energy transition

The discount is set to add £15 to the average annual bill.

It will provide £150 in support to 2.7 million extra people this year, bringing the total number of beneficiaries to six million.

The balance is made up from money needed to upgrade the power network.

Tim Jarvis, director general of markets at Ofgem, said: “While there is still more to do, we are seeing signs of a healthier market. There are more people on fixed tariffs saving themselves money, switching is rising as options for consumers increase, and we’ve seen increases in customer satisfaction, alongside a reduction in complaints.

“While today’s change is below inflation, we know customers might not be feeling it in their pockets. There are things you can do though – consider a fixed tariff as this could save more than £200 against the new cap. Paying by direct debit or smart pay as you go could also save you money.

“In the longer term, we will continue to see fluctuations in our energy prices until we are insulated from volatile international gas markets. That’s why we continue to work with government and the sector to diversify our energy mix to reduce the reliance on markets we do not control.”

The looming price cap lift will leave bills around the same sort of level they were in October last year but it will take hold at a time when overall inflation is higher.

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Inflation has gone up again – this explains why

Food price increases, also partly blamed on government measures such as the national insurance contributions hike imposed on employers, have led the main consumer prices index to a current level of 3.8%.

It is predicted to rise to at least 4% in the coming months, further squeezing household budgets.

Ministers argue that efforts to make the UK less reliant on natural gas, through investment in renewable power sources, will help bring down bills in future.

Energy minister Michael Shanks said: “We know that any price rise is a concern for families. Wholesale gas prices remain 75% above their levels before Russia invaded Ukraine. That is the fossil fuel penalty being paid by families, businesses and our economy.

“That is why the only answer for Britain is this government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control, to bring down bills for good.

“At the same time, we are determined to take urgent action to support vulnerable families this winter. That includes expanding the £150 Warm Home Discount to 2.7 million more households and stepping up our overhaul of the energy system to increase protections for customers.”

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Energy price cap: The changing face of your bill as poverty and climate demands grow

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Energy price cap: The changing face of your bill as poverty and climate demands grow

The small increase in domestic energy bills announced today confirms that prices have stabilised since the ruinous spikes that followed Russia’s invasion of Ukraine, but remain 40% higher than before the war – around 20% in real terms – with little chance of falling in the medium-term.

Any increase in the annual cost of gas and electricity is unwelcome. But, at 2%, it is so marginal that in practice many consumers will not notice it unless they pay close attention to their consumption.

Regulator Ofgem uses a notional figure for “typical” annual consumption of gas and electricity to capture the impact of price change, which shows a £34 increase to £1,755.

Money latest: Should I fix? Reaction to energy price cap shift

At less than £3 a month it’s a small increase that could be wiped out by a warm week in October, doubled by an early cold snap, and only applies to those households that pay a variable rate for their power.

That number is declining as 37% of customers now take advantage of cheaper fixed rate deals that have returned to the market, as well as direct debit payments, options often not available to those struggling most.

Ofgem’s headline number is useful as a guide but what really counts is how much energy you use, and the cap the regulator applies to the underlying unit prices and standing charges.

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Here the maximum chargeable rate for electricity rises from 25.73p per kWh to 26.35p, while the unit cost of gas actually falls, from 6.33p per kWh to 6.26p. Daily standing charges for both increase however, by a total of 7p.

That increase provides an insight into the factors that will determine prices today and in future.

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Energy price cap rises by 2%

The biggest factor remains the international price of wholesale gas. It was what drove prices north of £4,000 a year after the pipelines to Russia were turned off, and has dragged them back down as Norway and liquid natural gas imported from the US, Australia and Qatar filled the gap.

The long-term solution is to replace reliance on gas with renewable and low-carbon sources of energy but shifting the balance comes with an up-front cost shared by all bill payers. So too is the cost of energy poverty that has soared since 2022.

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Bills must rise to pay for energy transition

This price cap includes an increase to cover “balancing costs”. These are fees typically paid to renewable generators to stop producing electricity because the national grid can’t always handle the transfer of power from Scotland, where the bulk is produced, to the south, where the lion’s share is consumed.

There is also an increase to cover the expansion of the Warm Homes Discount, a £150 payment extended to 2.7 million people by the government during the tortuous process of withdrawing and then partially re-instating the winter fuel payment to pensioners.

And while the unit price of gas has actually fallen, the daily standing charge, which covers the cost of maintaining the gas network, has risen by 4p, somewhat counterintuitively because we are using less.

While warmer weather and greater efficiency of homes means consumption has fallen, the cost of maintaining the network remains, and has to be shared across fewer units of gas. Expect that trend to be magnified as gas use declines but remains essential to maintaining electricity supply at short notice on a grid dominated by renewables.

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