ECONOMY

Johnson to unveil £10bn a year tax rise to fund NHS and social care

UK politics & policy updates

Boris Johnson will on Tuesday defy a torrent of Tory criticism and announce a tax rise of more than £10bn a year, as he seeks to contain spiralling NHS waiting lists and tackle the funding crisis in social care.

The prime minister and chancellor Rishi Sunak on Monday tried to persuade furious Conservative MPs that their plan to raise national insurance rates by an expected 1.25 percentage points — for both employees and employers — is unavoidable.

The move is the latest step by Sunak in his attempts to rein in public borrowing ahead of a Budget due to take place on October 27. National debt now stands at about 100 per cent of gross domestic product.

The tax rise will garner more than £30bn over the next three years and in the longer term will pay for social care reform in England — including a cap on lifetime costs of about £80,000 and much more generous state support for people with modest assets.

But Johnson will sell the measure primarily as emergency support for the NHS. Health secretary Sajid Javid has warned that “shocking” estimates about the fallout from the coronavirus crisis — with the risk of hospital waiting lists reaching 13m — mean that urgent action is vital.

Tory strategists also recognise that a crisis in the NHS would be exploited by Labour in the run-up to a general election which must take place by 2024.

On Monday, Johnson made a downpayment on the plan to tackle waiting lists, announcing an additional £5.4bn for the NHS over the next six months to help tackle treatment backlogs accumulated during the Covid-19 pandemic.

“My government will not duck the tough decisions needed to get NHS patients the treatment they need and to fix our broken social care system,” said Johnson.

His comments indicate the prime minister is willing to use his 80-seat House of Commons majority to take contentious decisions, including the breaking of the 2019 Conservative election manifesto promise not to raise rates of national insurance, income tax or value added tax.

By focusing on the NHS, Johnson hopes to defuse intense criticism from Conservative ministers and MPs over the increase in national insurance — a levy which is paid by people on lower incomes but does not cover those aged over-66 or affect dividend or rental income.

One MP said: “It’s totally shit. We are asking people on low incomes to pay more tax so that privileged kids can inherit expensive houses.”

But the prime minister has been reassured by opinion polling that the public would support a rise in national insurance if it were presented in the right way.

Former Labour chancellor Gordon Brown raised national insurance rates by 1p in the pound in 2002 to boost NHS spending, in a move which is seen in Treasury circles as “the most popular tax rise in history”.

Johnson and Sunak have promised Tory MPs that the money secured from the increase in national insurance will first be spent on emergency NHS support, before gradually funding a reformed social care sector.

At the heart of the plan is a “cap” of about £80,000 on lifetime care costs of any individual — a measure intended to honour Johnson’s promise that people should not to have to sell their house to pay for their support.

Ministers have also been finalising a “floor” for the plan, which is expected to involve a big increase in the pool of people eligible for state support for their care — a crucial element in designing a fairer new system.

Ministers have discussed increasing the means-testing threshold — the value of a person’s assets before the state intervenes to pay care costs — from £23,250 to as much as £100,000.

“The cap stops you losing your house, the floor stops you losing everything,” said Torsten Bell, director of the Resolution Foundation, a think-tank.

Conservative critics of the plan say Johnson will face a rebellion when legislation to enact the national insurance increase comes before the Commons. But one MP admitted: “There won’t be enough of us — it’s going to happen.”

Critics of the scheme include trade secretary Liz Truss and leader of the Commons Jacob Rees-Mogg, but ministerial criticism could be muted by the prospect of a cabinet reshuffle, possibly as early as this week.

Meanwhile, Sunak attempted to downplay recent tensions with Johnson, telling Tory MPs at a Commons terrace reception that the “team” would stick together through a “tough autumn” of public spending decisions.

“We take our lead from the prime minister,” he said. “The leader of our party and the country — we owe him our support and loyalty.”

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