Downing Street has indicated that a hike in national insurance contributions to pay for social care remains on the table, just hours after a cabinet minister appeared to rule it out.
Business secretary Kwasi Kwarteng plunged the government’s plans into confusion by saying that he did not see how NICs could be used to fund the multi-billion pound project, as the Conserative manifesto for the last general election explicitly ruled out a rise in the rate of the levy, or of income tax or VAT.
But shortly afterwards, the minister was administered a slapdown by No 10, with a spokesperson telling reporters that “no decisions have been made” on the issue.
Boris Johnson and chancellor Rishi Sunak are close to an agreement that is expected to hike the tax by 1 per cent, but were unable to finalise the details this week after both of them were forced into self-isolation at home after coming into contact with Covid-positive health secretary Sajid Javid.
The plan to fix the social care crisis is not now expected to be unveiled until the autumn, more than two years after Mr Johnson claimed to have it ready and prepared on his arrival in Downing Street.
Proposals to pay for social care through NIC hikes sparked furious criticism, not only because they would breach the prime minister’s manifesto promise, but also because they woudl involve increasing tax on working-age young people, many of whom are unable to buy a home, in order to pay for a scheme designed to ensure that non-working elderly people are not forced to sell their homes.
And Mr Kwarteng appeared to blow a hole in the idea, saying: “That is what it says on the manifesto. I don’t see how we could increase national insurance.”
However, the Downing Street spokesperson later told reporters: “The prime minister has been clear that we will set out details later this year and that no decisions have been made.”
The mooted rise had already been widely attacked as unfair, because it would load extra taxes on younger and lower-paid workers – while pensioners would escape, because they do not pay national insurance.
The Resolution Foundation think-tank condemned “a terrible way to raise the funds required” and both senior Tory and Labour politicians echoed the criticism.
Speaking to Sky News, Mr Kwarteng opened up some wriggle room over tax rises, by saying “things have been very flexible over the last 18 months, we’ve lived through an unprecedented time”.
The long-delayed social care plan would come “by the autumn”, he said, adding: “I don’t think we’ll put up national insurance in that specific….”, before tailing off.
Increasing national insurance 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.
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.
Without a specific tax rise for social care – and with further huge spending cuts to come, in the autumn – Mr Sunak would have to increase borrowing further to tackle the crisis, which he is opposed to doing.
The business secretary also cast doubt on the pledge to lift isolation rules for double-vaccinated people who are close contacts of a Covid case on 16 August, warning it may not go ahead.
And Downing Street fuelled confusion on the issue by declining to say whether Mr Kwarteng was right, instead pointing to previous comments by Mr Johnson and Mr Javid, in which they named 16 August as the end date for current arrangements.
The timetable had already been attacked as an unnecessary delay, coming 5 weeks after all other Covid rules were lifted and blamed for the “pingdemic” of mass isolation of workers.
But, asked if it would “definitely go ahead”, Mr Kwarteng said: “We always review the information a week before and then we make the decision,” – adding he was keeping his “fingers crossed”.
