My dad, Stan the Man – God rest his soul – was a diehard Conservative. Taken from his mother at birth, he made it his mission in life to better himself and provide for his family and stunning wife Helen (still beautiful today). Work hard play hard was his motto. Right up until the day he died.
Stan worshipped Margaret Thatcher and fervently believed in the values she stood for: free enterprise, home ownership, anti-big unions and pro-low personal and business taxes.
Never was he happier than when I was back home from university so that over a bottle of Remy Martin late at night he could tell me how transforming Thatcher’s politics were. We’d argue like crazy – I liked opposing his views – but in my heart I knew he was right and I was wrong.
‘The Government’s tax raid is more reminiscent of something Jeremy Corbyn would have done’
What my dad would have said about the Government’s latest £12billion-a-year tax grab, announced last week as part of its rebooting of the National Health Service and social care provision, is probably unrepeatable in a family newspaper.
Certainly, non-PC terms such as a ‘bugger’s muddle’ and ‘pig’s ear’ would have been to the fore. Yet his central message would have been loud and clear: ‘How un-Tory. These are not the actions of a Conservative Government. Bring back Maggie.’
If only we could. As always, Stan the Man would have been spot on. The Government’s decision to bail out the National Health Service by hiking up National Insurance contribution rates is as un-Conservative as it gets.
It’s more reminiscent of something Jeremy Corbyn would have done if we as a country had been crazy enough to enable him to become Prime Minister in December 2019.
Sadly, the Conservative Government has swung violently to the Left – more red than blue – and it appears it is not for turning. Even more tax rises are likely to come our way over the remaining life of this Government, with some probably being announced as early as next month when Chancellor Rishi Sunak unveils his Budget.
A mockery of the Conservative manifesto
Higher capital gains tax rates? Further restrictions on the tax relief available on pension contributions? A more draconian inheritance tax regime?
Yes, anything and everything is possible – a point made last Thursday by the influential Institute for Fiscal Studies, which warned future NHS shortfalls would probably have to be plugged by further tax-raising measures. Talk about pouring money into a bottomless pit.
Admittedly, the Government’s finances have been savaged by the pandemic as it sought to protect jobs, give businesses every opportunity to keep afloat during lockdown, and ensure homeowners did not lose their cherished homes.
But it appears it has now become beholden to the NHS. It seems hellbent on pumping more money into it, irrespective of whether a) the money will then be used properly (reducing waiting lists, not on yet more bureaucracy); and b) without thinking through the unintended consequences of its largesse on the wider economy (lower business profits, fewer jobs, anaemic economic growth and lower take-home pay).
The Government’s raising of National Insurance contribution rates breaks a Conservative Party manifesto commitment made in November 2019
It all makes a mockery of the Conservative Party’s manifesto commitment to ‘unleash Britain’s potential’. The Government’s raising of National Insurance contribution rates – by 2.5 percentage points – and a widening of the NI net (to include older workers) is wrong on so many levels.
First, it breaks a Conservative Party manifesto commitment made in November 2019 ahead of the election: namely, a promise ‘not to raise the rates of income tax, National Insurance or VAT.’
‘This is a tax guarantee,’ the manifesto went on to say, ‘that will protect the incomes of hard-working families across the next parliament’.
How can any promise made in the next Conservative manifesto ahead of the 2024 General Election be believed? It can’t.
Second, the increase – borne equally by both employees and employers – is inherently unfair.
As far as workers are concerned, it will be the young (especially those with student debts to repay) and the low paid who will be hit hardest in the pocket. As for businesses, it is yet another cost to bear, on top of the hike in corporation tax rates due to be introduced in April 2023.
Could there have been a better way? Well, for a start, the Government should have made any further financing of the NHS conditional on wholesale reform of the service – stripping away layers of bureaucracy, thereby freeing up more resources to be used in tackling bloated waiting lists.
Baroness Altmann highlights that the £86,000 cap excludes a lot of care costs, so people will end up spending nearly double the cap before hitting it
Also, instead of increasing the National Insurance contribution rate by 2.5 percentage points, it could have overhauled the National Insurance system, a point made by London School of Economics and Warwick University academics.
Last week, they suggested the Government could have raised more money – £20billion a year rather than £12billion – by extending the current standard contribution rate of 12 per cent to incomes above £50,284.
Currently, income above this level attracts a lower rate of 2 per cent. By stretching the standard rate, it could then have reduced it – if only £12billion was required. Academic food for thought.
Of course, the Government could have increased income tax to pay for health and social care reform. But that probably would have attracted even more opprobrium and be seen as a greater manifesto- breaking sin than the broken promise on National Insurance.
£86,000 cap excludes a lot of care costs
It could also have raised capital gains and inheritance tax rates to pay for reform, but they are likely to rise anyway. As for the reforms made to how much people must pay when they require social care, they are thoroughly underwhelming, a point made expertly below by Baroness Altmann, a social care expert.
On the surface, they appear transformative with the introduction of a lifetime cap on the amount someone will have to pay for residential or nursing home care. But scratch a little deeper and you soon come to the conclusion that the new system will be little better – or fairer – than the existing one.
As Baroness Altmann highlights, the £86,000 cap excludes a lot of care costs, so people will end up spending nearly double the cap before hitting it. The system will also remain frightfully complicated with means-testing at its heart.
I would have liked the Government to have been bolder and backed the use of insurance to help fund social care.
Insurance plays a key role in long-term care funding in countries such as Germany and Singapore – primarily as a top-up to state provision. If such a public-private partnership works in these countries, there is no reason why it cannot work here in the UK.
Sadly, the bold prediction Boris Johnson made outside Downing Street after his overwhelming General Election victory in 2019 – ‘we will fix the crisis in social care once and for all’ – will not come to pass. It remains in crisis.
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