The worst possible way for Boris Johnson’s government to deal with the problem of providing high-quality, long-term social care is a short-term fix of taxing jobs and enterprise through a savage hike in National Insurance Contributions (NICs).
After all, when Labour, under Tony Blair, first identified the evolving funding gap for social care nearly two decades ago, it was immediately recognised as an issue that required permanent solutions, not higher taxes.
Not only does the proposed tax move breach Tory manifesto promises not to raise NICs. But any such increase would be completely unfair – since the largest burden would fall on younger citizens, many decades away from needing such care themselves.
The UK has no history of hypothecated taxes – separate pools of taxation for particular expenditure
Even worse, the current workforce and businesses would be paying the price for long-term government neglect without reaping any benefits for themselves.
It is also out of keeping with the Thatcherite and post-Brexit ideal of a low tax, free market economy capable of competing across the globe.
And let there be no doubt, even if the new tax is described as a ‘health and social care levy’, the £10bn or so of revenues collected will drop straight into the Exchequer’s ‘Consolidated Fund’ in the same manner as other taxation such as VAT and petrol duties.
The UK has no history of hypothecated taxes – separate pools of taxation for particular expenditure. Even the generous pension arrangements for state employees come straight out of the pockets of all taxpayers.
The only way in which the likely one per cent surcharge on employee and employer National Insurance now being discussed could possibly be justified is if it was a very short-term fix for the post-Covid era.
Ministers will no doubt claim that they had no other choice but to raise NICs to meet the shortfall for social care. That is disingenuous
It would then be axed if an alternative, such as an ‘automatic enrolment’ plan for social care – funded in a similar way to private sector pensions –were to be phased in over the next several years.
Atax increase now, as a ‘bridge’ until assets in the new fund build up, would be acceptable – temporarily.
But even this is highly risky for citizens in that temporary taxes to deal, for example, with a particular need such as an overseas conflict, have a nasty habit of becoming permanent.
As someone who, in recent years, has had direct experience of both social care in the home and of care homes for parents and elderly relatives I have nothing but the highest praise for the hard-working, overstretched and often poorly paid social and care workers who deliver the services.
But in a civilised society, having to sell a family home that was scrimped and saved for over a lifetime to pay for the occupants’ declining years, should never be an option. Yet, for too many, it is the only option.
The lifetime cap of £25,000 to £50,000 on personal contributions to social care costs (more like £100,000 in today’s money at the top end) – proposed by the independent commission headed by Sir Andrew Dilnot in 2011 – would at least ensure that most of the assets built up through hard work and out of after-tax income do pass on to future generations.
In my view, there could not be a worse time for the Government to ask employees and businesses to absorb a tax increase. The jobs market is already in chaos as the Covid furlough schemes are unwound. Raising National Insurance, effectively a tax on jobs, will not encourage people who have dropped out of the workforce to return.
Any further tax increases would stifle enterprise, entrepreneurship and investment –the core values of any Conservative government
This newspaper has long advocated the creation of a social care fund into which all employees of all ages are enrolled, similar to that for workplace pensions
Moreover, the Government is already committed to raising corporation tax (the charge on company profits) to pay for the pandemic.
Any further tax increases would stifle enterprise, entrepreneurship and investment –the core values of any Conservative government.
This newspaper has long advocated the creation of a social care fund into which all employees of all ages are enrolled, similar to that for workplace pensions.
At the end of last year, some 88 per cent of employees were participating in the workplace scheme, the highest level of provision in the UK’s history. Some £90billion and rising is being paid into the system each year.
Under such a plan for social care, each participant (as with pensions) would have their own personal account which would be managed in the private sector without the dead hand of government.
Ministers will no doubt claim that they had no other choice but to raise NICs to meet the shortfall for social care. That is disingenuous. They should have started by banking inefficiencies in the £212billion-a- year of NHS spending.
Courage and imagination – not new taxes – are what is needed to come up with a genuine social care market fix to deal with the needs of an ageing population once and for all.