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Johnson to break election tax pledge to fund social care reform

UK social care updates

Boris Johnson is preparing to break his election manifesto commitment not to raise tax rates in order to press ahead with a long-heralded overhaul of the UK’s creaking social care provision.

The prime minister is finalising a reform package that would see taxes increase to address weaknesses in the social care system. Ministers are attracted to proposals to fund the changes with an increase in national insurance, something the 2019 Conservative manifesto pledged not to do.

Johnson was close to sealing a deal on social care reform with chancellor Rishi Sunak and health secretary Sajid Javid in July, before the ministers were pinged by the Covid tracking app.

The prime minister’s allies are hopeful that an agreement can be struck soon to announce the reforms in the coming days. One said it was “ambitious but possible” that a deal would be unveiled next week.

The Treasury has been worried about the budgetary costs of an expansive social care package and has sought during heated negotiations among ministers to ensure the funds raised by any tax rise are sufficient to offset new spending.

Last-minute talks are focused on finalising how the reforms will be paid for. Those with knowledge of the plans said tax rises were “inevitable”. One Whitehall official said: “When doing something as huge and significant as fixing the social care system for the long term, you do need to pay for it somehow.”

A government spokesperson declined to comment on nature or timetable of any announcement. “We are committed to bringing forward a long-term plan to reform the social care system and we will set out proposals this year.”

With the total cost of the social care package likely to be around £10bn a year once fully implemented, it would require a 2p in the pound increase in national insurance, with 1p extra levied on both the employee and employer rates.

Raising national insurance will be greeted with hostility from Tory MPs, who are fearful that the party is risking its reputation for fiscal prudence. Sir John Redwood, a former Cabinet minister, described the NI proposal as a “bad idea”.

Dominic Cummings, Johnson’s former chief adviser, warned that voters would not forgive the government for breaking its pledges on taxes and called raising NI a “terrible way to do it”.

“Why should young people on average and below average incomes lose disposable income to pay for another subsidy for the older middle classes? This is bad policy and bad politics,” he wrote in a blog.

Many Treasury officials are aware of the downsides of using national insurance as a means of funding better social care because pensioners do not pay it, but their political bosses are attracted to the idea that people might think employers’ national insurance would be paid by other people and cite the difficulty of using income tax to fund social care when it is a devolved tax in Scotland.

The social care reform plan will have to strike a delicate balance between limiting how much individuals are required to contribute through a cap with extra funding from the state.

The Treasury has long argued that the government should not be more generous than the coalition government policy agreed in 2013 that the cap on social care costs should be £72,000, a figure that would be £80,000 after adjusting for inflation.

Health experts have also questioned whether the mooted additional funding would be sufficient to address deep-seated problems in the NHS.

Richard Sloggett, a former political adviser to Matt Hancock, the ex-health secretary, suggested the funding raised from an NI increase “would address some of the issues that have been exposed through Covid, in terms of the backlog of care, and meet the commitments on social care in the 2019 Conservative manifesto that have had to be put on ice because of the pandemic”.

But other key sticking points remained, such as the need for a properly funded plan to tackle the service’s workforce crisis, he added.

Business groups, including the Federation of Small Businesses, pleaded with Sunak not to introduce a “devastating” increase in NI, warning that the “jobs tax” would destabilise companies struggling to recover from the pandemic.

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