The unveiling of long-awaited government plans to overhaul the social care service has been delayed until the autumn, after Boris Johnson failed to reach agreement with key ministers ahead of parliament’s summer recess.
The prime minister, chancellor Rishi Sunak and health secretary Sajid Javid are known to be close to agreement on a scheme for funding care for elderly people, thought to involve a controversial hike in National Insurance payments by working-age people which was branded “inequitable” by experts.
The plan was due to be announced this week, to spare Mr Johnson the embarrassment the two-year anniversary since he arrived in No 10 claiming to have a worked-up solution to the care crisis.
But the requirement for all three to go into self-isolation after Javid tested positive for coronavirus has prevented them getting a decision “over the line”.
Downing Street today refused to comment on speculation that the ministers are on the verge of agreeing a hike of one percentage point in National Insurance contributions, which was widely attacked as unfair on younger workers.
Ministers appear to be backing away from a new tax on all over-40s, including pensioners, in favour of increasing NI in breach of a Conservative manifesto pledge not to hike rates of the three main taxes paid by individuals.
Following an intense battle between Mr Johnson and the chancellor, the pair are now understood to be close to agreement, but insiders said further face-to-face meetings would have helped seal it.
Low-income thinktank the Resolution Foundation condemned NICs as “a terrible way to raise the funds required” – a criticism echoed by both senior Tory and Labour politicians.
“Whilst I welcome the government’s focus on fixing social care, this is an unfair way of doing it,” tweeted Andy Burnham, the Greater Manchester mayor and a former Labour health secretary.
“NI is a regressive tax paid by working-age adults. How can it be right to ask a generation already saddled with university fees and high housing costs to pick up the whole tab?”
Gavin Barwell, Theresa May’s former chief of staff, said the government was right to push up taxes to fix social care but “wrong to pick national insurance”.
The tax, which is not paid by anyone receiving the state pension is “regressive”, he said, adding: “Why should older people with good incomes not contribute?”
And Torsten Bell, the Resolution Foundation’s chief executive, said: “It’s a tax disproportionately loaded on to younger and lower-paid workers, compared to a fairer rise in income tax.
“Why we would target a tax rise on the groups who have been hardest hit by the economic impact of this pandemic, while exempting older and wealthy individuals, is completely beyond me.”
Increasing NI by 1 percentage point – for both employers and employees – would raise £10bn a year and would probably be dubbed a new “health and social care levy”.
Initially, it would be used to cut alarming NHS waiting lists for treatment, which are feared could rise from 5.3 million to 13 million patients.
It would then be spent to cap care costs, along the lines of a decade-old proposal to limit costs to £50,000 so families do not end up selling their homes, and plug growing gaps in care treatment.
Paul Johnson, head of the Institute for Fiscal Studies, said: “Funding social care just from national insurance would be very inequitable.
“It would be a continuation of a long-term policy of hitting those of working age while protecting pensioners even for something designed to benefit people well over pension age. It’s a question of fairness.”
A 20-year-old starting work on £20,000 a year could expect to pay a total of £16,500 over the course of their careers as a result of a one percentage-point rise in NICs, said tax advisers Blick Rothenberg.
Robert Pullen, a partner at the firm, said: “ Increasing NIC rates by 1 per cent will cost £2 per week for someone earning £20,000 per year, or £17 per week for someone earning £100,000 per year. This is not insignificant and will make a real dent in average family incomes.
“The change would add an effective 0.52 per cent tax to someone earning £20,000 per year, and 0.9 per cent to someone earning £100,000 per year, due to the way the allowances work.”
Mr Pullen added: “ No doubt the government will try to ‘sell’ the idea of what could be seen as an age war by arguing that the additional NIC cost, for someone working from age 20 to 67 and earning £20,000 per year increasing by 3 per cent annually, is £16,500 as a result of the increase, but this will save them thousands of pounds in care costs later in life.”
Robert said: “ Increasing NIC in this way will add around £6bn to tax receipts per year from employees and self-employed individuals, which broadly doubles to £12.5bn if employers are also asked to pay an additional 1 per cent NIC, as seems likely.”
The prime minister’s spokesperson declined to put a date on the publication of the government proposals, saying only that it would come before the end of 2021.
