- PM Boris Johnson this week managed to get parliamentary approval for a package to tackle Covid healthcare backlogs and improve social care funding.
- GBP 12bn annually in extra taxation will be raised via a 1.25 percentage point increase in national insurance contributions (NICs).
- The transformation of the Conservative Party continues, but it remains questionable whether the measures will improve the outlook for either social care or the Tories.
Johnson managed to achieve this in three days after few UK government had made any major moves on social care funding for decades and some have tried and failed. In doing so, however, he has broken two major manifesto commitments: not to raise NICs, and to raise the basis state pension according to which was higher, earnings, inflation or 2.5%. On the other hand, extra spending on health and social care is certainly required in the UK where the Covid backlog of elective health procedures now stands at 5.6mn and the social care system has been underfunded for decades.
Against this backdrop, Johnson was forced to raise taxes against his will by his Chancellor Rishi Sunak who pointed out that the government cannot simply continue to borrow. Moreover, large parts of the British public associate NICs with health and social care – even if in reality they are another, hardly progressive tax. Therefore, Johnson’s calculation was that the best way of getting public support for a tax rise would be to raise NICs and claim that the money is purely for health and social care. Labour’s Gordon Brown did this successfully in 2001 in exactly the same way.
However, NICs are only paid for by working-age people, so this tax rise could be perceived as loading more tax onto the younger working population in the Midlands and the North of England to benefit relatively well-off pensioners with expensive houses in the South East. This explains why Johnson and Sunak linked the NIC rise to an announcement that the basic state pension would only rise by inflation or 2.5% to avoid the temporary 8% increase in earnings inflated by the Covid recovery. They also added a last-minute measure to ensure that as of 2023, those older than pension age who are still working will pay NICs on their earnings. In addition, the NHS will get the lion share of the money in at least the first 2-5 years to help with the Covid backlog.
In sum, this made it difficult for Tory MPs to vote against the proposals. Moreover, Johnson had given his cabinet and his MPs virtually no notice and pushed through a vote in the Commons only two days after the proposals were announced, leaving his opponents no time to organize. The PM also threatened a reshuffle afterwards to make sure discipline held. The result was Tory MPs voting for a GBP 12bn annual tax rise, on top of major corporation tax increases earlier in the year. The political realignment of the Tory party continues.
On the flip side of this dynamic, however, lies the risk that Tory voters in the South East would strongly object and that Johnson’s support from this traditional Tory base could weaken. The first opinion poll on this has shown this may possibly be a significant concern. If this trend becomes established, it may cause serious questions, as Tory MPs only tolerate Johnson because he is seen as a winner. Recall how Theresa May lost her poll lead in 2017 because of a flawed social care proposal in her manifesto. The risk is that Johnson gets the blame for tax rises, but not the credit for health and social care improvements. To make things worse, Johnson’s plans arguably do little solve the fundamental problems facing social care in the UK, for instance:
- The proposals are not implemented until 2023 and the cap on costs is only effective after three years, meaning that few people will practically benefit until 2026;
- Most people will not reach the GBP 86,000 cap after which the state will pay for social care costs, meaning that most people will get none of the new help;
- The NHS may take the vast majority of the available money – at least for the first few years and possibly longer term;
- Extraordinarily, local authorities (responsible for the provision of social care) have not yet been given any more money yet to provide better social care;
- The vast problem of low pay, poor conditions and lack of staff in the social care workforce has not been addressed;
- The proposed cap on costs is symbolic as it does not include food, accommodation and’add on’ costs, meaning that many people will still end up selling their homes in to pay for social care, contrary to Johnson’s promise that this would be unnecessary in the future.
The government says that some of these problems will be addressed in a white paper later this year. But it is extremely unlikely that all of these problems will be addressed fully.