National Insurance will rise by 1.25% next April (Picture: Getty)
MPs have voted to increase National Insurance to fund health and social care, a day after Boris Johnson announced the manifesto-breaking move.
Despite widespread backlash from within the Tory party, a vote to hike up the tax by 1.25% passed the House of Commons by 319 votes to 248.
It meant the Government’s working majority of more than 80 was reduced to 71, with a number of Conservatives apparently choosing to abstain while others made clear they were only voting with the greatest reluctance.
The levy is expected to raise £12 billion a year, which the prime minister said will be used to tackle the NHS backlog and reform social care.
Boris Johnson during the House of Commons debate (Picture: PA)
Mr Johnson accepted the tax broke a manifesto pledge, but said the ‘global pandemic was in no-one’s manifesto’ and it would not be sensible to borrow the money.
Under the plan, care costs will be capped at £86,000 from October 2023, and the government will provide some means-tested support for people with assets between £20,000 and £100,000.
But critics say it won’t raise near enough what is needed, while hitting those least well off the hardest.
In the Commons debate, the leader of the Northern Research Group of Tory MPs, Jake Berry, warned that by listing the levy on people’s payslips as a health and social care charge, it would ‘never go down, it can only go up’.
He said: ‘No party is ever going to stand at an election and say I’ve got a good idea, vote for me, I’ll cut the NHS tax.
‘It is fundamentally un-Conservative and in the long term it will massively damage the prospects of our party because we will never outbid the Labour Party in the arms race of an NHS tax.’
Former minister Steve Baker said the party was facing a ‘generational crisis’ due to its inability to fund promises dating back more than a century.
He added: ‘Now the Conservative Party, at some stage in our lifetimes, is going to have to rediscover what it stands for because I have to say at the moment we keep doing things we hate, because we feel we must.’
Sir Keir Starmer said that someone with assets of £186,000 could still be forced to find £86,000 under the proposals (Picture: PA)
Earlier at Prime Minister’s Questions, Mr Johnson attempted to quell the backlash, suggesting the insurance industry could protect people from having to sell their homes to pay for the cost of care, amid claims the £86,000 cap would not be enough.
During a terse exchange, Labour leader Sir Keir Starmer questioned how someone with £186,000 in assets would club together £86,000 to pay for care without selling their home.
He accused the PM of ‘hammering’ working people, saying a care worker on the minimum wage will now receive a tax rise but not a pay rise.
What are the key proposals?
- The tax will be raised through a 1.25% rise in National Insurance – which working people and their employers pay to ensure benefits like the state pension – from April 2022
- This will cost £255 a year for someone earning £30,000, and £505 a year for someone on £50,000
- From April 2023, the levy will appear as a separate entry on individuals’ pay slips. It is at this point that working adults above pension age will chip in.
- From October 2023, people will no longer pay more than £86,000 in care costs (not including food and accommodation) – over their lifetime
- Once people have reached this cap, ongoing costs for personal care will be met by local authorities
- Those with between £20,000 and £100,000 in assets will get means-tested help towards care costs from their local council
- Those with less than £20,000 will not have to pay towards care costs from their assets, but might have to contribute from their income
He said millions of families now face a ‘double whammy’ of a national insurance rise and a cut of £1,000 per year from Universal Credit.
He argued the government should be asking for more from wealthier people by getting them to pay from their stocks, shares, dividends and properties.
The PM responded by claiming Labour did nothing to tackle issues of health and social care during its time in power over 10 years ago.
He also insisted the tax hike meant the top 20% of households by income will pay forty times what the poorest 20% pay.
After PMQs, No 10 said the announcements on social care mean the private insurance industry has the ability to provide products to aid people with potential costs.
Questions over how the new scheme will operate came as the Resolution Foundation economic think tank criticised the plans for being unfair across the generations and offering more benefits to wealthy southern households.
Although the levy will hit the earnings of working people above retirement age from April 2023, the think tank said only one in six pensioner households have earnings while two-thirds have private pension income that is not covered by the new tax.
Another key aspect of the criticism is that the NHS is expected to get the bulk of the money in the first three years, with just £5.6bn set aside for social care.
In the debate before the vote, Conservative Jake Berry said he was ‘very concerned that this tax is not really a health and social care tax, it’s actually a Trojan horse for an NHS tax’.
A number of Tories criticised the plans during the debate, which lasted several hours.
Shadow chancellor Rachel Reeves savaged her Conservative counterpart for not showing up.
She quipped that ‘perhaps he’s gone for a swim’ – a reference to reports the minister plans to build a 12-metre pool, gym, four showers and a tennis court at his Grade II-listed manor house.
And she accused the government of introducing a ‘tax on jobs, a tax on the economic recovery’, adding: ‘We will not support it.’
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