Our Social care reform – who is going to pay?

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The prime minister wants to fix the social care system – a policy welcomed by almost everyone – but his plan to fund reforms by increasing National Insurance has been roundly condemned by current and former ministers on both sides of the political spectrum.

The prime minister set out in the Commons how he aims to tackle the social care crisis amid a growing Tory backlash over reported plans to raise National Insurance to fund the changes to the system in England – in breach of a general election commitment. But if reports are correct, Boris Johnson’s plan is likely to face opposition – here is why it has created such a stir:

What is the prime minister’s plan?

Reports emerged in early September that Mr Johnson was lining up an increase to National Insurance to fund the government’s long-awaited social care reforms. The government also announced the NHS is to be given an extra £5.4 billion budget boost over the next six months – half the amount health service bodies said is needed to respond to Covid-19 and tackle the backlog caused by the coronavirus pandemic. Reports have suggested that lifetime contributions on care will be capped at about £80,000 and National Insurance payments will be increased by 1.25% to raise between £10 billion and £11 billion per year.

Who would be affected by a National Insurance increase?

National Insurance contributions are based on weekly financial thresholds, with 0% due on the first £184 earned, 12% on sums between £184.01 and £967, and 2% on remaining earnings. According to the Office for National Statistics, the average weekly wage in Great Britain is £576, with a weekly National Insurance contribution amounting to £47.04 (8.16%). So anyone whose primary earnings are above the £967 and 2% threshold, or just over £50,000 a year, ultimately pays a proportionately lower rate than those who have the bulk of their earnings in the 12% threshold. As such, much of the criticism of the plan revolves around the unfair impact a National Insurance hike would have on young and lower income workers.

Why are some Conservatives against the plan?

Multiple Tory ministers and grandees have spoken out against how raising the National Insurance would disproportionately affect younger and poorer workers.

Have any alternatives been proposed?

Former prime minister Sir John Major warned increasing National Insurance would be “regressive”. Speaking at the FT Weekend Festival, Sir John instead called for the Government to take the “straightforward and honest” approach of increasing general taxation. Former Tory health secretary Jeremy Hunt, who is currently chair of the Health and Social Care Select Committee, suggested in an article for The Telegraph the funding could come from a “new health and care premium”.

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Sources: Techlink

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