Our Social care reform – who is going to pay?

Share

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”.

Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.

Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.

You are now departing from the regulatory site of Finura. Finura is not responsible for the accuracy of the information contained within the linked site.

Sources: Techlink

Share

Other News

Six Ways To Use Your Money For Good

There are multiple ways to make a positive social impact with your money. Here are six of the most common that you may wish to consider, that your Finura financial planner can help you to implement. CHARITABLE FOUNDATIONS Trusts and foundations are usually created via a single primary donation. They are registered with the Charity […]

Stamp Duty Land Tax – Higher Rates For Additional Dwellings

Stamp Duty Land Tax (SDLT) rates for additional residential properties have been increased from three percentage points above the standard residential rates of SDLT to five percentage points above the standard residential rates of SDLT for any transactions which take place on or after 31 October 2024.

Below is a summary of the rates which applied from 23 September 2022 – 30 October 2024 to additional properties versus the new rates with effect from 31 October 2024.

Lifestyle Modelling: The Crystal Ball for Your Financial Future

Have you ever found yourself asking “When can I afford to retire?”, “Can I afford to leave a legacy for my loved ones?”, “How much do I need to be saving for retirement?”. If you have, lifestyle modelling will likely be beneficial for you.