Johnson breaks manifesto promise with £12bn tax hike for health and social care

Boris Johnson announced a £12 billion-a-year tax raid as his Government broke two major manifesto commitments in a day.

The Prime Minister said a new health and social care levy, based on a 1.25 percentage point increase in National Insurance contributions, was “the reasonable and the fair approach”.

The move breaches a Tory commitment not to raise National Insurance, while a second manifesto pledge, to maintain the pensions triple-lock, was also temporarily abandoned.

Under the new levy a typical basic rate taxpayer earning £24,100 would pay £180 more a year, while a higher rate taxpayer on £67,100 would pay £715.

As well as providing extra funding for the NHS to deal with the backlog built up during the Covid-19 pandemic, the new package of £36 billion over three years will also reform the way adult social care in England is funded.

A cap of £86,000 on lifetime care costs from October 2023 will protect people from the “catastrophic fear of losing everything”, Mr Johnson said.

The Government will fully cover the cost of care for those with assets under £20,000, and contribute to the cost of care for those with assets between £20,000 and £100,000.

Mr Johnson said breaking the manifesto pledge “is not something I do lightly”.

“But a global pandemic was in no-one’s manifesto and I think the people of this country understand that in their bones, and they can see the enormous steps this Government and the Treasury have taken.

“After all the extraordinary actions that have been taken to protect lives and livelihoods over the last 18 months, this is the right, the reasonable and the fair approach.”

In addition to the health and social care levy, there will also be a 1.25 percentage point increase in the dividend tax, to ensure those who receive their income from shares also contribute.

Initially, main rate National Insurance contributions will increase by 1.25 percentage points from 12% to 13.25% from April 2022, as systems are updated.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips.

It will be paid by all working adults, including those over the state pension age, unlike other National Insurance contributions.

Mr Johnson said basing the levy on National Insurance, paid by both workers and firms, will “share the cost between individuals and businesses” and ensures “everyone will contribute according to their means”.

Over the first three years of the new levy, some £5.3 billion will be spent on social care, with the rest set to help the NHS tackle a backlog which could see waiting lists rise from 5.5 million to 13 million unless action is taken.

As the cost of the care cap starts to increase, social care will take a larger share of the funding in future.

Paul Johnson, director of the Institute for Fiscal Studies economic think tank, said the new levy came on top of bumper tax rises already announced this year.

“This is a huge year for tax rises – a permanent increase of 1.5% of national income to highest in peacetime,” he said.

MPs will vote on the measures on Wednesday and despite hostility to tax rises on the Tory benches, criticism was muted in the Commons.

“I can’t really imagine any backbenchers wanting to turn round to their own constituents and say they tried to vote down extra money for the NHS and care system,” former health secretary Jeremy Hunt told the BBC.

Labour leader Sir Keir Starmer opposes the National Insurance increase and told the Prime Minister a tax on wealth aimed at “those with the broadest shoulders” should be used to pay for an improved social care system.

What Mr Johnson had announced was “a tax rise on young people, supermarket workers and nurses” adding: “Read my lips: the Tories can never again claim to be the party of low tax.”

Although health and social care are devolved issues, the tax rise will apply across the UK.

Mr Johnson said Scotland, Wales, and Northern Ireland will receive an extra £2.2 billion a year as a result, around 15% more than they will contribute through the levy, creating a “union dividend of £300 million”.

But SNP Westminster leader Ian Blackford said the announcement was a “poll tax on Scottish workers to pay for English social care”.

Within hours of Mr Johnson abandoning the Tory commitment not to raise National Insurance, Work and Pensions Secretary Therese Coffey announced another breach of the 2019 manifesto.

The triple-lock, which guarantees that the state pension will increase in line with inflation, wage growth or 2.5%, whichever is higher, will not apply in 2022/23 due to an “irregular statistical spike in earnings” as a result of the pandemic.

She said the move “will also ensure that as we are having to make difficult decisions elsewhere across public spending, including freezing public sector pay, pensioners are not unfairly benefiting from a statistical anomaly”.