An extra £36 billion will be invested in the health and care system over the next three years, including £5.4 billion in adult social care, to ensure it has the resources it needs to recover from the pandemic. In order to fund such a significant increase in permanent spending, the Government has had to make the tough but responsible choice to increase taxes. A new 1.25 per cent dedicated Health and Social Care Levy, based on National Insurance Contributions, is therefore being introduced.
I welcome the Government’s proposed changes to the care charging model. From October 2023, nobody starting care will have to pay more than £86,000 for their personal care over their lifetime, a seismic change in the way care is paid for. As a result, people will rightly no longer have to suffer the fear caused by unpredictable or unlimited care costs. This is an important start to reforming social care in this country and I look forward to seeing how the Government’s plans progress. As your MP, I can assure you that I will be engaged in all discussions about these reforms and continue to represent the views of constituents.
The level at which the state will cover a person’s care costs will be raised from £14,250 to £20,000. Anyone with assets between £20,000 and £100,000 will contribute to the cost of their care but will receive means-tested state support, an upper limit over four times higher than the current one.
Of course, while absolutely vital, these changes alone will not solve the long term problems in the social care system. At the heart of the plan is greater integration between the NHS and social care and investing in the quality of care and in carers themselves. This is key to achieving the person-centred care and reduction of pressures on both services that I am sure we are all keen to see. I am told that, over the coming months, the Government will be working alongside the social care sector to develop a “Blueprint for Adult Social Care” which will set out further details on proposals, including new support for unpaid carers, investment in housing and technology and better information to help those who need care to navigate the system.
I have spoken with colleagues at the Treasury about the introduction of a Health and Social Care Levy, and I understand that they viewed this measure as a difficult but necessary one. The decision to raise taxes was not taken lightly, but it will mean that we can face the challenges facing health and social care in the UK following the coronavirus pandemic.
The HSCL will be effectively introduced from April 2022 when NICs for working age employees, self-employed, and employers will increase by 1.25 per cent. The Levy will be legislatively separated from 2023 when NICs rates will return to 2021-22 levels. Dividend tax rates will also be increased by 1.25 per cent to fund the Plan for Health and Social Care.
It is worth noting that that there are some exemptions to the Levy, which is applied at a flat rate of 1.25 per cent. People earning less than the Primary Threshold / Lower Profits Limit in 2021-22 will not pay the Levy, and the Levy will not apply to Class 2 or 3 NICs. This means that the highest 14 per cent of earners will be paying around half the revenues of the Levy, and that no-one earning less than £9,568 will pay a penny.
Unlike Income Tax or VAT, an increase in NICs ensures businesses contribute alongside employees and the self-employed.
The HSCL will apply to individuals working above State Pension age from April 2023. I appreciate that this will be frustrating for many. I have conveyed the strength of feeling about this to colleagues at the Treasury, who assure me that this small contribution is a necessary and extraordinary one to tackle the pressures on our health and social care system following the pandemic.
Colleagues at the Treasury assure me that they viewed a broad-based tax base like Income Tax, VAT or NICs as the only viable means to raise the sums needed for such a significant investment in health and social care. The decision to base the Levy on NICs was made with the view that every individual should contribute according to their means, and that the cost of improving the health and social care systems should be shared between individuals and businesses. Successive governments have increased NICs to invest in the NHS, and the NICs system was set up to fund social security. The existing NICs ringfence for the NHS, established in 1948 and expanded in 2003, means that funds for health and social care will be clearly displayed on payslips. It is worth noting that France, Germany and Japan have all increased social security contributions to fund social care provision – the latter two with specific social care levies.