NI hike for social care is disastrous

by Chief Editor, Richard Rimkus

In 2019, Boris Johnson made a pledge that his party would not raise National Insurance (NI). In fact, almost two years later it still states on the Conservative Party website that this is a manifesto guarantee. Despite this, Johnson and Sunak have reportedly agreed to a 1 per cent hike in NI to reform social care; a decision which is set to enrage countless Tories.

There is no doubt that serious social care reforms are needed to deal with the adverse effects that the pandemic has engendered. Alastair McLellan, editor of Health Service Journal, has estimated that elective surgery waitlists have now reached 2+ years for the first time in two decades. Not only has the NHS been put under extreme pressure from fighting Covid-19 on the frontline, but the strain on our health services has also been compounded by the number of NHS workers isolating and increased A&E admissions.

According to Jeremy Hunt, who is Chair of the Health and Social Care Committee, “the attraction of a Health and Social Care levy is it would fund the NHS backlog in the short term and desperately needed improvements in the social care system in the medium/longer term”. Whilst the £6bn in revenue would adequately meet the acute needs of the health and social care sector, breaking the triple tax lock and having younger generations pay for the care of pensioners is not the right decision.

Under the plans being considered, those under 66 would face increased NI designed to tackle the NHS backlog and create a lifetime cap to care. This lifetime cap would limit the amount that individuals contribute to their care costs, reportedly set at around £50,000. This cap however is wholly unreasonable. A more sensible measure would be to impose a cap that was set in proportion to a person’s assets or income, thereby ensuring that those with a greater means pay more in costs before the state steps in.

Moreover, if plans go ahead, revenue would be generated by a levy that disproportionately affects young and lower-paid workers, those already hit economically hardest by the pandemic. Meanwhile, older and wealthier individuals would be largely exempt from the tax hike, even though they form the cohort that more greatly benefits from elderly care.

There are multiple reasons for why NI disproportionately affects people based on age and wealth. Firstly, the threshold for paying NI is lower than that for income tax. This means that those on lower wages will feel the effects more than those earning more. Secondly, NICs are paid on earning – not on total income – meaning that wealthier individuals who receive money from dividends, investments or rely on savings for their income will not be contributing to the hike. Thirdly, Class 1 and Class 2 NI contributions end when you reach State Pension age, which is currently 66, rising to 67 by the end of the decade. The corollary of this is that pensioners will not be paying to reform the social care that they are the primary recipients of.

Additionally, those in Westminster will not be hit nearly as hard as many of their constituents and reforms will adversely affect the public sector workers that they are aimed to help. In fact, Boris Johnson made these very points in 2002 when arguing that raising national insurance is regressive. Hence, not only is the levy unfair, but it is also rife with irony. It was only a decade ago that Conservative party leaflets claimed that Labour’s national insurance hike was a “tax on jobs” that would kill the country’s economic recovery.

I have argued before that the Conservatives are shifting away from being party of sound finances and once again, they are making a critical departure from their traditional value of low taxes. Those in the Cabinet are neglecting their responsibility to the middle classes and will be at risk of disgruntling the lower-income voters that secured them the last election.

These low-income workers have been central to driving recent political change and have further been hardest hit by the pandemic. To compound this with a health and social care levy funded by increased NI contributions is dangerous both politically and economically.

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