Keir Starmer orders MPs to vote against government’s social care plan

By Jessica Elgot and Heather Stewart
Labour leader Keir Starmer said only those with the ‘broadest shoulders’ should pay more to fix the system.
Labour leader Keir Starmer said only those with the ‘broadest shoulders’ should pay more to fix the system. Photograph: House of Commons/PA

Keir Starmer ordered MPs to vote against the government’s national insurance rise and social care plan, amid jitters from some MPs as to how the party can counter a Conservative party prepared to raise taxes to fund the NHS.

On Wednesday, Labour confirmed it would publish its own fully-costed social care plan which could include additional funds raised on income from financial assets or property – but would not set a timeframe for doing so.

There is private frustration among some in the party that no firmer plan has been produced, which two shadow cabinet sources blamed on both Starmer and the shadow health secretary, Jon Ashworth. Starmer has said only that those with the “broadest shoulders” should pay more to fix the system.

It is understood there was no detailed discussion of how to respond to Johnson’s social care proposals at Monday’s three-hour shadow cabinet meeting

However, other senior sources defended the approach, saying the party had to announce its policies on its own terms. “When we announce these major policies – which will be the cornerstone of our economic plan – we have to do it on our terms and make it our moment,” one shadow cabinet minister said.

Speaking in the Commons, the shadow chancellor, Rachel Reeves, highlighted a number of areas that were facing no additional tax burdens, a hint at the areas Labour could examine.

“They include those who get their income from financial assets, stocks and shares. Sales of property. Pension income. Annuity income. Interest income. Property rental income. Inheritance income,” she said.

By international standards, taxes in the UK are relatively modest. The amount taken by the state will be around 35% of national income following the decision to bring in a new health and social care levy, which puts Britain in the bottom half of the league table and well behind the 40%-plus rates in France and the Scandinavian nations.

By the UK’s own standards, however, the tax take is historically high. On a sustained basis, it is necessary to go back to the immediate aftermath of the second world war to find a time when tax as a share of gross domestic product stood at 35% – and at that time the trend was sharply down.

Carl Emmerson, the deputy director of the Institute for Fiscal Studies, said there was no comparable data for the period before the second world war but the tax take was almost certainly lower. “It was much cheaper to run an empire than a welfare state,” he said.

The tax take fell after 1945 for two reasons. Peacetime required a smaller state and the economy grew by around 3% on average. A country’s tax “burden” depends not just on whether taxes are going up or down but how fast the economy is expanding and so by the end of the 1950s the tax-to-GDP ratio was down to 27% of GDP. Higher government spending in the 10 years that followed meant higher taxes, which briefly hit 35% of GDP at the end of the 1960s, and remained only just below that level when Margaret Thatcher came to power in 1979.

There was then another 15-year decline in tax as a share of national income taking it once again below 30% by 1994. Since then, the trend has been steadily upwards, with only a few temporary dips.

Larry Elliott

Reeves said the party opposed a rise in national insurance because of the burden on younger working people and said the £86,000 cap on care costs would not save pensioners having to sell their homes.

“It is a broken promise, it is unfair, and it is a tax on jobs,” she said. “Under the prime minister’s plan, many will still face the threat of selling their homes to fund their care. Someone with a house worth £186,000 would still have to pay £86,000 even with this cap – and that’s before living costs of going into a care home. How does the chancellor suggest they pay those fees without selling their home?”

Reeves said Labour had set out a number of policies to deal with the crisis in social care. “Our guiding principle will be ‘home first – because that’s what the overwhelming majority of people want,” she said, adding the party would also offer “a new deal for care workers to create a well-motivated, skilled and properly rewarded workforce, with higher wages and more support for unpaid carers”.

At prime minister’s questions on Wednesday, Boris Johnson repeatedly challenged the Labour leader to say what his alternative plan would be. Starmer replied: “His plan is to impose an unfair tax on working people. My plan is to ensure that those with the broadest shoulders pay their fair share. That is the difference.”

Seventeen leftwing MPs have called for a new wealth tax to replace the national insurance rise, taxing those with assets worth over £5m.

The former shadow cabinet minister Richard Burgon said: “The wealth of the richest in our society has skyrocketed while millions of families are struggling to make ends meet. We urgently need investment in our social services and we should tax the wealth of the super-rich to fund it, not pile more costs on to working people.”

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