Starmer tells PM Labour will not support rise in national insurance to pay for social care
Labour leader Sir Keir Starmer has told the Prime Minister his party will oppose plans to increase national insurance to fund social care.
In a letter to Boris Johnson, who is set to reveal his plans to fix the crumbling social care system in the Commons on Tuesday, Sir Keir said Labour supported tax increases to overhaul the system.
But he said that a national insurance rise would “hit working people hard, including low earners and young people” and disproportionately impact businesses that had been damaged by the pandemic.
Sir Keir (pictured) said: “The taxes that pay for social care should be fair across the generations and all forms of income. Those with the broadest shoulders should pay more – not the working families now set for an unfair tax rise.”
And he added: “We’ve said that this additional investment will need to be funded through tax rises – but increasing national insurance contributions isn’t the right way to do it.
“It would hit working people hard, including low earners and young people, and would place a huge burden on businesses just as they’re trying to get back on their feet.”
Reports have suggested that lifetime contributions on care will be capped at about £80,000 and national insurance will be increased by 1.25% to raise between £10 billion and £11 billion per year.
But the reported proposals have faced backlash from Tory backbenchers among others.
Former Conservative leader Sir Iain Duncan Smith told The Telegraph the plans were a “sham” because they did not reform the social care system, while the newspaper also reported the Government was considering holding a snap vote in the Commons this week on the proposals.
While Rachel Harrison, GMB union national officer, said: “We all know our crumbling social care system desperately needs more cash.
“But raising regressive national insurance – which takes money from the pockets of the lowest-paid workers, is not the way to do it.”
Sir Keir added that Labour would work with the Government on a long-term plan if it would “genuinely fixes the crisis in social care and has a fair funding model”.
Taxing asset wealth a ‘fairer’ way to pay for social care, says Blair think tank
Reports have suggested that Prime Minister Boris Johnson is preparing to increase National Insurance by 1.25% to raise between £10 billion and £11 billion per year, while capping personal lifetime contributions to care at about £80,000.
But the Tony Blair Institute said it would be “deeply unfair” to hike National Insurance, in a move that the organisation said would “impose the costs of care on the shoulders of the young”.
And a fixed monetary cap, built on the proposals of the Dilnot Commission – which published its findings 10 years ago – would “disproportionately hit less wealthy households”, according to Mr Blair’s think tank.
Instead, ministers should use a more “proportionate” alternative of tying care contributions to asset wealth.
In its report, Fair Social Care: Priorities and Funding Options, the institute said: “We propose a more progressive alternative cap set at a fixed percentage of an individual’s initial assets.
“With this approach, the state would step in once a care user had contributed 15% of their assets towards the cost of care.”
The institute said there was a “major problem” with the Government’s rumoured proposals to put National Insurance up by at least 1%.
“It would leave the cost of improvements in social care falling almost entirely on those of working age and tax labour income rather than those who have benefited from the boom in asset prices of recent years,” it said in the report, due to be published on Tuesday.
“It would also exacerbate existing differences between the tax treatment of the employed and the self-employed.”
The 37-page report proposes three further “progressive” funding alternatives to shift “more of the burden on older generations”, including an increase in income tax for the over-40s, replacing council tax with a tax that is proportional to property values and reforms to capital gains tax.
James Browne, head of work, income and inequality analysis at the Tony Blair Institute, said: “The Government should aim to protect families against ruinous care costs as part of their social care reforms.
“Capping their total care costs is critical but it should be done in a fairer way than a flat cash maximum that will mean people with modest assets, such as homeowners in parts of the country with lower house prices, being forced to use a higher proportion of their assets than their better-off peers to pay for care.
“Our ‘fair social care cap’ is a much more proportionate approach if this Government is serious about levelling up.
“NICs (National Insurance contributions) may be a politically attractive option to fill the yawning funding gap for social care, but it would be deeply unfair to impose the costs of care on the shoulders of the young after 18 months in which asset prices have jumped, widening the wealth gap, especially as advances in medical technology may reduce their need for social care in the future.”
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