What is the PM announcing today?
- A 1.25 percentage point rise in national insurance rates and dividend tax.
- Someone on a £30,000 salary would pay an extra £255 a year.
- Someone on a £50,000 salary would pay an extra £500 a year.
- In return there would be a limit of £86,000 on social care costs, although that might not include accommodation.
- People will not pay for social care when their assets are below £20,000 and there will be a means test between that level and £100,000.
Britons face the highest ever tax burden in peacetime as Boris Johnson mounted a £12billion raid vowing that no-one will ever have to pay more than £86,000 towards social care.
In a bold package that could make or break his premiership, Mr Johnson laid out that national insurance rates will rise by 1.25 percentage points from April. A typical higher earner will be paying more than £700 extra.
Finally revealing his vision for social care in England, he said reform can no longer be ‘ducked’ and the elderly should not lose their life savings and homes due to the ‘bolt from the blue’ of dementia.
But the respected IFS think-tank said the changes added to a ‘huge year for tax rises’ with the burden at its highest sustained level for peacetime.
There was also grumbling from the Tory benches, with MPs asking Mr Johnson if he still believed in ‘low taxes’ and warning that the NHS will simply suck up the extra money without making genuine improvements.
Just £5.3billion of the £36billion of revenue raised in the next three years is expected to go to social care, with the rest earmarked for a huge ‘catch up programme’ to stabilise the NHS after the pandemic.
Social care chiefs welcomed the moves, but warned they will not be enough to tackle the problems being driven by the aging population and staffing shortages.
From October 2023 no-one should have to pay more than £86,000 for care over their lifetimes.
Alongside the cap, there will be a ‘floor’ of £20,000 in assets, with anyone who has less than that not being required to contribute to costs.
Between that and £100,000 in assets people will be asked to pay part of the bill.
Mr Johnson said it would be ‘irresponsible’ to pay for the overhaul from borrowing and he had to make ‘difficult’ decision. The PM openly admitted that he was breaking a manifesto commitment not to raise NI, but swiped: ‘A global pandemic was in no-one’s manifesto.’
He said the money will not go to ‘middle management’. ‘It will go straight to the front line,’ he insisted.
The Cabinet agreed the controversial package at its first face-to-face meeting since the summer break. Despite disquiet among ministers and on the Tory benches, there seems little appetite for a major revolt in a vote slated to happen tomorrow.
National insurance will be hiked on 25million workers and millions of firms, in a move that will cost employees on £30,000 a year an extra £255 a year in tax. A typical higher rate earner on £67,100 faces paying £715 more annually. Dividend income will also be subject to an extra 1.25 percentage point levy to ensure the charge cannot be dodged.
From April 2023 the NI increase will be reversed and a health and social care levy will be legally introduced – at which point pensioners who are still earning will also need to pay it. People will still need to contribute to ‘room and board’ costs when living in a residential home.
Mr Johnson dismissed complaints about the fairness of using the NI system, saying that the highest earning 14 per cent will pay half the extra. The majority of small businesses will not face an extra burden due to tax reliefs, he added.
Mr Johnson will hold a press conference alongside Rishi Sunak and Health Secretary Sajid Javid later.
Conservative former leaders Lord Hague and Iain Duncan Smith have joined a welter a criticism of the upheaval, saying that the public will not forget the ‘defining moment’ of the 2019 manifesto being effectively torn up.
Mr Duncan Smith said the policy, key elements of which are still unclear, looked like a ‘sham’ that will not fix the problems with social care.
Sir Keir Starmer said a tax on wealth aimed at ‘those with the broadest shoulders’ should be used to pay for an improved social care system.
In a second move, ministers are also breaking their manifesto pledge to keep the state pension ‘triple lock’. It will be suspended for a year, with pensioners given around 2.5 per cent, rather than the 8 per cent rise they would have received.
In a bold package that could make or break his premiership, Mr Johnson laid out that national insurance rates will rise by 1.25 percentage points from April – with most of the cash initially going to stabilise the health service after the pandemic
Boris Johnson visited a care home in Westport before unveiling the social care proposals in the Commons today
Boris Johnson laid out the plans to the Cabinet at a meeting in Downing Street this morning
The Cabinet agreed to the proposals thrashed out between the PM, Chancellor and Health Secretary
IFS head Paul Johnson said it was a ‘huge year for tax rises’ with the burden now at its highest level in peacetime
Mr Johnson said he was setting out the ‘biggest catch up programme’ in the history of the NHS today
Boris hands NHS extra £5.4bn in ‘great shake-up’ to ‘bust the Covid backlog’
The NHS is being handed an extra £5.4billion in funding to help it survive winter and ‘bust the Covid backlog’.
Health Secretary Sajid Javid acknowledged waiting lists ‘would get worse before they get better’ as he announced the funding increase for the next six months.
The Department of Health said £1billion of the total would go specifically towards clearing waiting lists.
This includes £500million to open extra surgical theatres and invest in new technology to increase the number of operations.
Some £2.8billion will be allocated for costs such as better infection control and social distancing procedures to continue to protect against the virus.
A further £478million will help with the discharge of patients from hospitals to free up beds.
Tens of millions of people are set to be hit by a new tax rise to pay for the Prime Minister’s long-awaited social care reforms [File photo]
Boris Johnson said: ‘The NHS was there for us during the pandemic – but treating Covid patients has created huge backlogs.
‘This funding will go straight to the frontline, to provide more patients with the treatments they need but aren’t getting quickly enough.
‘We will continue to make sure our NHS has what it needs to bust the Covid backlogs and help the health service build back better from the worst pandemic in a century.’
Mr Javid said: ‘We know waiting lists will get worse before they get better as people come forward for help, and I want to reassure you the NHS is open, and we are doing what we can to support the NHS to deliver routine operations and treatment to patients across the country.’
The Government said numbers waiting for operations such as hip replacements and cataract surgery could reach 13 million, as people look to have procedures they have been putting off in the pandemic.
NHS chief executive Amanda Pritchard said: ‘This funding provides welcome certainty for the NHS, which has pulled out all the stops to restore services, while caring for thousands of seriously ill Covid patients… during the toughest summer on record.’
She added that the extra investment ‘will enable the NHS to deliver more checks, scans and procedures as well as helping to deal with the ongoing… pressures of the pandemic’.
It comes as independent charity the Health Foundation said it will cost up to £16.8billion over the remainder of this parliament to clear the record backlog.
The IFS’ Paul Johnson said the dual nature of National Insurance contributions meant the tax hike amounted to double the 1.25 per cent announced.
Speaking to BBC Radio 4’s World At One programme, Mr Johnson said: ‘We keep saying 1.25 per cent – it is really 2.5 per cent.
‘It is one-and-a-quarter from the employer on every £100 you earn, it is one-and-a-quarter from the employee – you add that up and it is two-and-a-half per cent.
‘It is really a 2.5 per cent tax rise on earnings.’
He added: ‘This is £12billion on top of £25billion of tax rises in the Budget – this must be the biggest tax rising year in many decades.’
Downing Street will be pleased that the Tory response to the plan in the Commons was muted.
Backbencher Huw Merriman asked the PM why he decided to ‘reject other forms of insurance as a model’ to fund social care.
He told MPs: ‘The Germans brought in an insurance model back in the ’80s, facing the same problems that we had. It relies on the private insurance sector and (Conservative peer) Lord Lilley has brought forward a Bill which would see the Government set up a state insurer.
‘Those retired householders would then pay a premium, which would be a fixed charge and then that charge would only be paid upon the debt of that individual. Don’t those models do a little more to intergenerational fairness?’
The Prime Minister insisted his Government ‘looked at all those models’, adding: ‘I think the problem is that we need to go for an insurance system that it works and has a genuine chance of being set up.
‘The only way of encouraging the financial services industry to come in and offer products is to take away that risk of catastrophic cost. And that is too much of a substantial risk for too many people and it means the insurance market hasn’t been able to develop.
‘We believe this is the best way forward for the country.’
Former cabinet minister Damian Green asked: ‘Can (he) guarantee that the social care sector will itself see a significant uplift in its support in the immediate future?’
He said: ‘There’s been much debate about how the money’s being raised, but I think of more concern is how the money is going to be spent. My fear is that once you start spending on perfectly proper things like the NHS backlog, there will never come a point where there’s enough money in this new fund to be transferred to social care that needs it now. You can’t spend the same pound twice.’
Mr Johnson replied: ‘The investments in social care will be protected by the Government and by the Treasury.’
He added later: ‘I don’t think anyone wants to see money just bundled into the NHS without reform.’
Vaccines minister Nadhim Zahawi squirmed as he was challenged on the proposals in a round of interviews this morning, admitting he is not ‘comfortable’ with the idea of flouting manifesto commitments.
Downing Street said the PM told Cabinet that a ‘new plan is needed’ to address the issues with the NHS and social care. Mr Johnson’s spokesman said the mood during the hour-long session was ‘positive’ and there was ‘agreement that this is an issue that needs to be tackled’.
The tax rise of 1.25 percentage points shatters the solemn Tory 2019 election vow not to raise national insurance.
Downing Street has dubbed as ‘unfair and often catastrophic’ the situation where someone who has dementia may have to pay for their care in full, while someone cared for by the NHS would receive care for free.
It said one in seven people now pays more than £100,000 for their care, and said the system can lead to ‘spiralling costs and the complete liquidation of someone’s assets’.
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’.
Cash will be poured into the NHS to allow it to operate at 110 per cent of capacity to help it start clearing a waiting list that has soared to more than five million during the pandemic and is on course to hit 13million by the end of this year.
The NHS will also be ordered to undergo a major efficiency drive. Ministers hope the money will clear the waiting list backlog by the time of the next election.
Mr Johnson said: ‘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 per cent 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 £36billion over the next three years, with money from the levy going directly to health and social care across the whole of our UK.’
The proceeds of the tax rise of 1.25 percentage points will then be used to fund a new cap of £86,000 on the cost of social care, reducing the risk that people will have to sell their homes to pay for help.
Assets below £100,000 will be at least partially protected from the state – a huge increase on the current system in which people have to fund all their care costs if they have assets of more than just £23,350.
Tory MPs and health experts have warned there is a danger that the entire sum will be swallowed by the NHS, leaving nothing for social care.
The concern is said to be shared by Mr Sunak, who has sought guarantees he will not be asked for more money for the sector in future.
However, Sally Warren, ex-director for social care at the Department of Health and now with the King’s Fund think tank, said there was still a ‘big worry’ the NHS will keep the funding.
She told The Telegraph: ‘We think this is going to take many, many years. There are lots of uncertainties, but it could take around five to seven years.
‘This is not something that will disappear in a year or two if the NHS just works faster – staff are already at risk of burnout.
‘Our big worry is if the NHS gets all or most of the money for the first three years, social care just can’t wait for that long. And is it realistic to think the NHS will simply hand back money which will be paying for more staff ? That is not realistic.’
The tax hike will be known as the ‘Health and Social Care Levy’ from April 2023, after HMRC systems are redesigned, and will appear as a separate line on tax statements.
Ministers have agreed the levy will be ‘legally ringfenced’ to prevent it being siphoned off for other purposes by future governments.
The ‘median worker’ earning £24,000 a year will pay an extra £3.50 a week in tax, according to sources.
On the employer side, the government says 70 per cent of the revenue will come from the biggest 1 per cent of employers – those with more than 250 employees.
The Prime Minister has insisted the package could resolve the crisis in both the NHS and social care. ‘The NHS is the pride of our United Kingdom, but it has been put under enormous strain by the pandemic. We cannot expect it to recover alone,’ he 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.’
The tax rise will cost an extra £130 for a worker on £20,000 a year. A worker earning £40,000 will pay an extra £380, while someone with a salary of £60,000 will pay an additional £630.
Defending the proposals earlier, Mr Zahawi told Sky News: ‘Successive governments have attempted to come forward with plans and have never quite delivered.
‘I think this Prime Minister is determined to actually fix the broken social care system.’
He added: ‘One in seven people pay over £100,000 for their social care.
‘If you have assets of over £23,350, then your social care costs can be absolutely backbreaking.
‘So, it has to be dealt with and this Prime Minister will not shirk that responsibility, and he will set out his plans today.’
Sajid Javid and Brandon Lewis were among the Cabinet ministers arriving for the first face-to-face session since the summer break this morning
Chancellor Rishi Sunak in Downing Street as the Cabinet signed off on the social care blueprint
Foreign Sectretary Dominic Raab was also at the Cabinet gathering to discuss social care this morning
Mr Zahawi 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.
‘But I don’t want to pre-empt what the Prime Minister will announce or what the Chancellor will say in the press conference later today.’
Pressed on whether the triple lock pension pledge could also be broken, Mr Zahawi added: ‘No-one is in the business of wanting to break any promises.
‘I’m not comfortable with breaking any manifesto promises.’
The decision to raise national insurance has alarmed Cabinet ministers, with one branding it ‘idiotic’. There are claims that at least one frontbencher is considering their position.
Writing in The Times, former party leader Lord Hague said breaching a manifesto commitment by increasing National Insurance would be a ‘defining moment’.
He said such a move would result in a ‘loss of credibility when making future election commitments, a blurring of the distinction between Tory and Labour philosophies, a recruiting cry for fringe parties on the right, and an impression given to the world that the UK is heading for higher taxes.
‘That adds up to an extremely high price, and if I was still in cabinet I would be on the very reluctant end of the argument about funding social care through a tax rise that is seen as breaking an election promise.’
Downing Street is confident the PM will be able to face down any Cabinet revolt over the issue – in part because he is threatening a reshuffle.
Tory chair Amanda Milling and Work and Pensions Secretary Therese Coffey were in Downing Street today
Conservative former leaders Lord Hague (left) and Iain Duncan Smith (right) have joined a welter a criticism, saying that the public will not forget the ‘defining moment’ of the 2019 manifesto being effectively torn up
Boris Johnson went out for a run this morning as he prepares to unveil his plan to hike National Insurance later
But ministers are braced for a battle with Tory MPs over the breaking of a manifesto pledge.
Mr Sunak last night appealed for unity as he warned Tory MPs: ‘It’s fair to say we’ve got a tough autumn ahead.’
Former Cabinet minister Jake Berry questioned why low earners in the North should pay more tax to help wealthier pensioners ‘keep hold of their homes’.
The chairman of the Northern Research Group of Tory MPs said: ‘It doesn’t really seem to me reasonable that people who are going to work in my own constituency in east Lancashire, probably on lower wages than many other areas of the country, will pay tax to support people to keep hold of their houses in other parts of the country where house prices may be much higher.’
He warned that national insurance was a ‘jobs tax’ that disproportionately hit the low paid.
The Chancellor fought for the increase in national insurance to be capped at one percentage point but was overruled by the PM.
Damian Green, who was de facto deputy PM under Theresa May, said it did not seem likely the NHS would give up money it had got used to in three years’ time.
The PM’s plans will place a cap on the amount people have to pay for social care, expected to be between £50,000 and £80,000 (stock image used)
Homes they would have kept under scheme
Widow who lost her family haven
Nancy Griffiths, 55, has lived in Kingston, south-west London, for 33 years.
She and her daughter Tai, 13, became very close to their elderly neighbours David and Violet Edwards, pictured on their wedding day, regularly spending Christmas together.
David, who had worked for British Aerospace for many years, sadly developed dementia in 2016 and died two years later aged 92.
Violet had hoped to spend her final years in her marital home. However, because the couple had saved and lived frugally, David’s care had to be paid for privately at a cost of almost £2,000 a week.
After David’s death, Violet, 93, became very frail and was moved into a care home at an eyewatering cost of £65,000 per year.
Nancy Griffiths outside the home of her neighbours who she knew for 32 years in Kingston upon Thames, Surrey. They had to sell it to pay for care
David and Violet Edwards on their wedding day. They lived in their home for 33 years until David died in 2018 ages 92
Within four years, £300,000 of their hard-earned savings of about £400,000 had disappeared. Nancy, who had power of attorney, unfortunately had no option but to sell the Edwards’ house last year to pay for Violet’s care.
It had initially been on the market for £620,000 but – under pressure to sell – she was forced to accept a lower offer of £520,000.
‘David made everything in that house, from the conservatory to the fireplace – he even papered all the walls,’ said Nancy, pictured above. ‘It broke my heart to sell it.’
She added: ‘I fully support any changes to the law so that people don’t have to sell their home for social care. I think it’s completely wrong.
‘I’m not Violet’s daughter so I won’t be getting anything in the will, but I feel so sorry for people who expected to rely on money from their parents after they’ve died.’
For sale: Mum’s pride and joy
Barbara Brand-Cotti, 81, worked as an antiques and jewellery dealer. After meeting her husband Roland in London, they moved to Lincolnshire to pursue their dream of raising children in the countryside.
When their daughter Holly, now 44, was only seven, Roland died, and Barbara had to raise Holly and her two siblings alone.
Barbara was careful with money, and Holly remembers the whole family celebrating when she paid off the mortgage.
Barbara Brand-Cotti moved her family to the Lincolnshire countryside when her daughter Holly, now 44, was only seven
In 2017, Barbara (pictured, seated) had a stroke and the next year she was put into social care and daughter Holly (centre) has an outstanding debt of £100,000 for her mother’s care
‘That beautiful Lincolnshire cottage was her pride and joy, especially the garden,’ Holly said.
But in 2017, Barbara – pictured above with her family – had a stroke and the next year she was put into social care.
After disagreements with the nursing home over payments, including an attempt to evict Barbara during lockdown last year, the family turned to the Care Campaign for the Vulnerable organisation for legal advice, but eventually gave in and said they would sell the house on Barbara’s death.
‘It’s one of the biggest injustices in this country that at the end of your life, when you’ve paid into the system, you have to give up everything you’ve saved,’ she said.
‘That cottage meant the world to my mum and she wanted to be able to leave something to us. It just felt wrong to sell it. I felt like I had failed her. Boris Johnson was elected on a manifesto pledge to fix social care. Was that an empty promise?
‘These proposed changes can’t come soon enough.’