PM confirms breaking manifesto pledge with £12bn a year tax raid to pay for health and social care

Boris Johnson broke an election promise as he announced a £12 billion a year tax raid to address the funding crisis in health and social care.

The Prime Minister insisted the new health and social care levy, based on a 1.25 percentage point increase in National Insurance contributions, was “the reasonable and the fair approach”.

Downing Street said that a typical basic rate taxpayer earning £24,100 would pay £180 a year, while a higher rate taxpayer on £67,100 would pay £715 as a result of the new tax.

As well as providing extra funding for the NHS to deal with the backlog of cases built up during the Covid-19 pandemic, the new package of £36 billion over three year will also reform the way adult social care in England is funded.

A new cap of £86,000 on lifetime care costs from October 2023 will protect people from the “catastrophic fear of losing everything”.

The Government will fully cover the cost of care for those with assets under £20,000, and contribute to the cost of care for those with assets between £20,000 and £100,000.

Currently anyone with assets worth more than £23,250 has to fund their care in full.

Mr Johnson entered Downing Street in 2019 claiming he had a clear plan to fix the social care crisis and the manifesto which helped secure his landslide election win later that year promised not to raise National Insurance.

Admitting that pledge had been scrapped, Mr Johnson said: “No Conservative government ever wants to raise taxes and I will be honest with the House, yes, I accept that this breaks a manifesto commitment, which is not something I do lightly.

“But a global pandemic was in no-one’s manifesto and I think the people of this country understands that in their bones and they can see the enormous steps this Government and the Treasury have taken.

“After all the extraordinary actions that have been taken to protect lives and livelihoods over the last 18 months, this is the right, the reasonable and the fair approach.”

Scotland, Wales and Northern Ireland will receive an additional £2.2 billion in additional health and social care spending from the levy.

In addition to the health and social care levy, there will also be a 1.25 percentage point increase in the dividend tax to ensure those who receive their income from shares also contribute.

Initially, main rate National Insurance contributions will increase by 1.25 percentage points from 12% to 13.25% from April 2022 as systems are updated.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips.

It will be paid by all working adults, including those over the state pension age, unlike other National Insurance contributions.

In the run-up to the announcement Tory MPs have been critical of the plan to raise National Insurance, while economists highlighted the historically high tax burden.

But despite the outcry ahead of the announcement, criticism from Conservative backbenchers in the Commons was muted.

A vote on Wednesday could provide a focal point for any revolt, although former health secretary Jeremy Hunt said a rebellion large enough to defeat the Government was unlikely.

“I can’t really imagine any backbenchers wanting to turn round to their own constituents and say they tried to vote down extra money for the NHS and care system,” he told the BBC.

Mr Johnson said basing the levy on National Insurance, paid by both workers and firms, will “share the cost between individuals and businesses” and ensures “everyone will contribute according to their means”.

Over the first three years of the new levy, some £5.3 billion will be spent on social care with the rest set to help the NHS tackle its backlog.

“The number of NHS patients waiting for tests, surgery and routine treatment in England is at a record high of 5.5 million and could potentially reach 13 million over the next few years,” Mr Johnson said.

As the cost of the care cap starts to increase, social care will take a larger share of the funding in future.

Paul Johnson, director of the Institute for Fiscal Studies economic think tank, said the new levy came on top of bumper tax rises already announced.

“Expect the tax rises just announced to raise about £12 billion a year, about 0.5% of GDP,” he said on Twitter.

“Remember that’s on top of £25bn of tax rises announced in the Budget.

“This is a huge year for tax rises: a permanent increase of 1.5% of national income to highest in peacetime.”

Labour leader Sir Keir Starmer opposes the National Insurance increase and told the Prime Minister a tax on wealth aimed at “those with the broadest shoulders” should be used to pay for an improved social care system.

What Mr Johnson had announced was “a tax rise on young people, supermarket workers and nurses, a tax rise that means a landlord renting out dozens of properties won’t pay a penny more but the tenants working in full-time jobs would, a tax rise that places another burden on business just as they are trying to get back on their feet”.

“Read my lips: the Tories can never again claim to be the party of low tax,” he added.

Although health and social care are devolved issues, the tax rise will apply across the UK.

Mr Johnson said Scotland, Wales, and Northern Ireland will receive an extra £2.2 billion a year as a result, around 155 more than they will contribute through the levy, creating a “union dividend of £300 million”.

But SNP Westminster leader Ian Blackford claimed the announcement was a “poll tax on Scottish workers to pay for English social care”.

Copyright (c) PA Media Ltd. 2021, All Rights Reserved. Picture – Boris Johnson during visit to Westport Care Home, east London (c) Paul Edwards / The Sun / PA.