British Prime Minister Boris Johnson on Tuesday unveiled a new tax that will fund the country’s mounting health and social care costs in the wake of the COVID-19 pandemic.
A new UK-wide 1.25 per cent health and social care levy from April 2022 will begin as a hike in the compulsory National Insurance (NI) contributions by taxpayers, a move that breaks Johnson’s election manifesto pledge to not hike taxes.
However, he defended his so-called social care package as the “biggest catch-up programme” for the state-funded National Health Service (NHS) and pointed out that the pandemic had rendered the manifesto pledge impossible.
No Conservative government ever wants to raise taxes, and I will be honest with the House, I accept yes I accept this breaks a manifesto commitment, which is not something I do lightly, said Johnson in his statement to the House of Commons to announce the plans.
But a global pandemic was in no-one’s manifesto. I think the people in this country understand that in their bones and they can see the enormous debts this government/ the Treasury has taken, he said.
The plan, to be voted on in Parliament later this week, was signed off by ministers at a Cabinet meeting earlier on Tuesday and came after days of anger from Conservative Party backbenchers opposed to tax rises.
The 1.25 percentage point increase is expected to raise about 12 billion pounds which, in the early years, will mainly be used to fund dealing with the NHS.
The new Health and Social Care Levy is the necessary and responsible thing to do to protect the NHS, sharing the cost between businesses and individuals and ensuring those earning more pay more, said UK Chancellor Rishi Sunak, one of the key ministers behind formulating the plans.
We’re tackling the NHS backlog and taking decisive action to fix our broken social care system, he said.
From 2023, the new levy will become a separate tax on earned income, calculated in the same way as the current NI contributions and will be paid by both employees and employers.
Johnson said to ensure everyone contributes fairly, all working adults, including those over the state pension age, will pay the levy and the rates of dividend tax will also increase by 1.25 per cent to help fund this package.
Some will ask why we don’t increase income tax or capital gains instead. But income tax isn’t paid by businesses, so the whole burden would fall on individuals, roughly doubling the amount that the basic rate taxpayer could expect to pay, Johnson told MPs.
Instead, our new levy will share the cost between individuals and businesses, and everyone will contribute according to their means, including those above State Pension Age, so those who earn more will pay more, he claimed.
The announcements are aimed at tackling the COVID backlogs, reform adult social care, and bring the health and social care system closer together on a long term, sustainable footing. It claims that 36 billion pounds will be invested in the health and care system over the next three years as a result of the changes.
This additional funding is a critical investment in our country’s future it will give the NHS the extra capacity it needs to get back on its feet and is a vital first step in the reform of our broken care system, said UK Health Secretary Sajid Javid.
The move follows a long-standing funding gap in state-backed social care across the board, including the elderly, sick and disabled.
The government said that currently around one in seven must pay over 100,000 pounds for care, with bills falling indiscriminately on some of the sickest and most vulnerable.
With its proposed changes, it claims that no one will now have to pay more than 86,000 pounds in care costs over the course of their lifetime, regardless of where they live, how old they are, what their condition is, or how much they happen to earn.
The government said it will continue to support those without savings with the state covering all care costs for anyone with assets under 20,000 pounds.
Anyone with assets between 20,000 pounds and 100,000 pounds will be expected to contribute to the cost of their care but will also receive state support, which will be means-tested.