Boris Johnson has announced tax hikes for millions of Britons in order to pump an extra £13bn a year into the NHS and social care.
In one of the biggest political gambles of his career, the prime minister confirmed he would raise National Insurance (NI) contributions for employers and employees by 1.25% from April 2022 to fund the new “health and social care levy”.
The move breaks the 2019 Tory election pledge not to increase NI, income tax or VAT, and has already been attacked by backbenchers as “un-Conservative”.
But in what appeared to be a bid to limit the political damage, the NI rise will be for just one year and in 2023 the “levy” will take over. From then, the levy will be printed separately on pay packets, while national insurance will revert to its previous rate.
A typical basic rate taxpayer earning £24,100 will have to pay £180 a year extra in tax, or £3.46 a week. A typical higher rate taxpayer earning £67,100 will have to pay £715 a year more in tax.
Speaking in the Commons, Johnson tried to present the plans as fair to all ages as he revealed that working pensioners for the first time would be asked to pay the National Insurance hike.
″I will be honest with the House, yes I accept this breaks a manifesto commitment - which is not something I do lightly. But a global pandemic was in no-one’s manifesto,” the prime minister said.
He also unveiled a new 1.25% increase in tax on income from share dividends to help fund the huge increases in spending required by the NHS and social care plan.
Only one Tory MP, Richard Drax, openly opposed the tax rise in the Commons, warning that “As Conservatives, broken pledges and tax rises should concern us”.
He asked if Johnson agreed that “the Conservative way to raise revenue is to lower taxes, not raise them”. Johnson replied.
“I do agree with that general proposition but in the current circumstances...I think it is right we take the steps we are to put the NHS back on a sustainable footing and to deal with the problems of social care which make long term solutions for the NHS so difficult.”
The NHS will get a total of £36bn for the next three years, which will increase its capacity by an extra 10% by 2023/24. This change is expected to fund an extra 9 million checks, scans and operations.
Initially, social care will get just £5.4bn over the next three years before seeing the bulk of the new levy directed towards the elderly and other adults who need support.
A central plank of the plan is big reform to the social care sector. Many people are currently excluded from state support for social care, as anyone with assets like a home or savings worth more than £23,250 is barred from help.
From October 2023 there will be a fourfold increase in that cap on assets to £100,000, meaning fewer people will have to sell their homes to afford care in old age.
The new plan means that no one will ever have to pay over £86,000 for roughly equivalent to three years of care.
Keir Starmer said Johnson’s “pretence” that he is taking the action he is on NHS and social care funding because of the pandemic was “not going to wash”.
The Labour leader told the House of Commons that the NHS and social care was facing a “crisis”.
Starmer told the PM: “He is putting a sticking plaster over gaping wounds which his party inflicted. He made that commitment on social care before the pandemic and he said he would pay for it without raising taxes before the pandemic.”
Christina McAnea, the general secretary of the Unison union, also criticised the plan.
“General taxation should be the solution for social care, not national insurance hikes. The focus on funding instead of reform is a cart-before-the-horse approach,” she said.
“A detailed plan is needed first to mend and future-proof a sector broken by years of neglect. Only then will the cost of making good the damage become clear.”
SNP Westminster leader Ian Blackford claimed the announcement was a “poll tax on Scottish workers to pay for English social care”.