Boris Johnson announces 1.25% hike in National Insurance

By Neil Shaw

Prime Minister Boris Johnson has announced a 1.25% increase in National Insurance from April 2022 to address the funding crisis in the health and social care system.

Mr Johnson acknowledged the new health and social care levy breached a Tory election commitment but told MPs “a global pandemic was in no-one’s manifesto”.

Labour leader Sir Keir Starmer called it: "A tax rise on young people, supermarket workers and nurses."

The Cabinet has backed Boris Johnson’s plans to reform health and social care funding.

The Prime Minister set out in the Commons how he aims to tackle the social care crisis in England.

The tax hike will raise around £10 billion, which will be spent on the NHS as it recovers from the Covid-19 pandemic as well as to help people avoid crippling adult social care costs.

The NI rise will come into place across the UK - but the devolved nations will decide how to spend it - Mr Johnson said it would be directed into each nation's health service.

Boris Johnson has told MPs that the Government must help the NHS “recover” from Covid.

The Prime Minister told the Commons: “We must now help the NHS to recover to be able to provide this much-needed care to our constituents and the people we love. We must provide the funding to do so now.

“We not only have to pay for the operations and treatments that people decided not to have during the pandemic, we need to pay good wages for the 50,000 nurses who have enabled that treatment and who can help us tackle waiting lists that could otherwise expand to 13 million over the next few years.”

Mr Johnson said: “Having spent £407 billion or more to support lives and livelihoods throughout the pandemic from furlough to vaccines, it would be wrong for me to say that we can pay for this recovery without taking the difficult but responsible decisions about how we finance it.

“As a permanent additional investment in health and social care it would be irresponsible to meet the costs from higher borrowing and higher debt. From next April, we will create a new UK-wide 1.25% health and social care levy on earned income hypothecated in law to health and social care with dividend rates increasing by the same amount.

“This will raise almost £36 billion over the next three years, with money from the levy going directly to health and social care across the whole of our UK.”

The Prime Minister told MPs: “No Conservative government ever wants to raise taxes and I’ll be honest with the House, 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, Mr Speaker.

“I think the people of this country understand that in their bones and they can see the enormous steps that this Government and the Treasury have taken.”

He went on: “This is the right, the reasonable and the fair approach – enabling our amazing NHS to come back strongly from the crisis, tackling the Covid backlogs, funding our nurses, making sure people get the care and treatment they need in the right place at the right time, and ending a chronic and unfair anxiety for millions of people and their families up and down this country.”

Ministers, who had been largely kept in the dark about details of the proposals, were briefed during the first in-person Cabinet meeting held in Downing Street this year.

The Prime Minister’s official spokesman said: “The Cabinet agreed to the proposals set out.

“There was strong agreement that this is a long-standing issue, particularly on the social care side, which had been ducked for too long and which needed to be addressed.”

Mr Johnson, Chancellor Rishi Sunak and Health Secretary Sajid Javid updated Cabinet ministers on the package.

The Prime Minister’s official spokesman said they set out the plan to tackle Covid backlogs in the health system, reform adult social care and “bring the health and social care systems closer together on a long-term sustainable footing”.

The spokesman said: “Cabinet agreed the challenges faced by our NHS and care sector are closely linked, and a lack of integration means people are often stuck in the wrong care setting.

“The Prime Minister highlighted that under the current care system, anyone with assets over £23,350 pays for their care in full, which can lead to spiralling costs with around one in seven people now paying over £100,000.

“The Prime Minister said that the changes he will announce today will fix this problem, which is causing chronic and unfair anxiety for millions of people up and down the country.”

Under current arrangements, anyone with assets over £23,350 pays for their care in full, but No 10 said the costs were “catastrophic and often unpredictable”.

Ahead of his Commons statement, Mr Johnson said: “We must act now to ensure the health and care system has the long-term funding it needs to continue fighting Covid and start tackling the backlogs, and end the injustice of catastrophic costs for social care.

“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.”

Mr Johnson, along with Chancellor Rishi Sunak and Health Secretary Sajid Javid, will attempt to sell the plan to the public in a Downing Street press conference.

The Prime Minister announced the Government will begin the “biggest catch up programme” in the health service’s history.

He told MPs: “Today we are beginning the biggest catch up programme in NHS history, capping the Covid backlogs by increasing hospital capacity to 110% and enabling 9 million more appointments, scans and operations.

“As a result, while waiting lists will get worse before they get better, the NHS will aim to be treating around 30% more elective patients by 2024-2025 than before Covid. And we will also fix the long-term problems of health and social care that the party opposite certainly failed to tackle.”

Reports have suggested that lifetime contributions on care will be capped at about £80,000, and National Insurance will be increased by 1.25 percentage points to raise between £10 billion and £11 billion per year.

Ahead of the announcement, No 10 remained tight-lipped on the detail, but it had been reported the proposals would be called a health and social care levy.

Vaccines minister Nadhim Zahawi told Sky News that while he wanted to meet every manifesto commitment, the UK economy had gone through an “unprecedented shock” after the coronavirus pandemic.

Asked on Sky News whether he was “comfortable” breaking the 2019 manifesto commitment, he said: “I want to meet every single manifesto promise that we make, that’s the right thing to do.

“We have gone through an unprecedented shock to the economy because of the global pandemic and we’ve had to deal with it and make some really tough decisions.”

In a further sign of Tory discontent, 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.

The Guardian reported a Conservative frontbencher was considering their position over the plans.

Shadow health secretary Jonathan Ashworth said: “A long-term plan on social care and a rescue plan to address the crisis the NHS has been in for years are both long overdue.

“The Prime Minister must set out how he will bring down waiting lists quickly, support the NHS workforce, fix crumbling hospitals and deliver modern equipment to speed up diagnosis of deadly diseases and, crucially, ensure more people can access the social care they need.”

Liberal Democrat leader Sir Ed Davey said: “Boris Johnson gave voters a cast-iron guarantee that he would not raise National Insurance – and now he’s breaking voters’ trust again.

“Even worse, the Government’s plans won’t fix the social care crisis. Our loved ones will still not get the quality care they need.”

Mr Johnson also announced that fom October 2023, no one starting care in England will be forced to spend more than £86,000 over their lifetime, Boris Johnson said, telling MPs he would protect people from the “catastrophic fear of losing everything”.

Shona Lowe, Managing Director - Private Client & Corporate Director, financial planning from abrdn commenting on the government’s announcement today on the funding of long term care, said: “Today’s announcement gives us some much needed hope that the long term care issue will be tackled, even if not everyone with agrees with the how. A conversation around how long term care will be funded is often delayed by people until it’s too late. Raising awareness of the issue and its potentially significant impact on family finances should make clients more willing to bring it into their financial planning earlier.

“Planning for the future can be a difficult area for clients, particularly when that involves considering the possibility of declining physical and mental health. Wills and Power of Attorney are now an integral part of that future plan and this proposed reform should ensure long term care planning is too. This is a good thing for the individuals concerned and their wider family.”

Boris Johnson said the state should target its help at protecting people against the “catastrophic fear of losing everything to pay for the cost of their care”, adding: “That is what this Government will do.

“We are setting a limit on what people can be asked to pay and we will be working with the financial services industry to innovate and help people to insure themselves against expenditure up to that limit.

“Wherever you live, whatever your age, your income or your condition, from October 2023 no-one starting care will pay more than £86,000 over their lifetime and no-one with assets less than £20,000 will have to make any contribution from their savings or housing wealth.

“That’s up from £14,000 today.

“Meanwhile, anyone with assets between £20,000 and £100,000 will be eligible for some means-tested support and this new upper capital limit of £100,000 is more than four times the current limit, helping many more people with modest assets.”

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