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by Alain Tolhurst and Kate Proctor
07 September 2021
Boris Johnson announces National Insurance rise to pay for social care

Boris Johnson announces National Insurance rise to pay for social care

The Prime Minister has finally unveiled his plans to overhaul England's social care system with a new tax of 1.25 per cent to raise an extra £36billion.

From next April every person in work in the UK will pay the additional amount on their National Insurance contributions, and then from 2023 it will be a separate levy to fund care as well as help tackle the NHS backlog.

While National Insurance contributions will also increase in Scotland, the amount raised and sent to the Treasury will not fully cover the sum of the additional Barnett consequential generated by the increase in spending south of the border.

Downing Street said the devolved administrations will receive around 15% more than workers pay in.

In the Commons, Johnson told MPs: “From next April, we will create a new UK-wide 1.25 per cent health and social care levy on earned income, hypothecated in law, to go to health and social care with dividend rates increasing by the same amount.

“This will raise almost £36billion over the next three years, with money from the levy going directly to health and social care across the whole of our United Kingdom.

“This won't be paying for a pay awards for middle management, it will go straight to the front line at a time when we need to get more out of our health and social care system than ever before.”

A Downing Street spokesman said: "Scotland, Wales and Northern Ireland will benefit from £2.2 billion additional government social spending as a result of this.

“In total they receive more funding that will be collected on a net basis from their citizens. There is a clear union dividend - Scotland, Wales and Northern Ireland taken together will benefit from around 15% more than is generated from their citizens, equivalent to about £300m pounds every year.”

Big businesses will pay the most, with 70 per cent of the money raised from firms which with 250 or more employees, with smaller companies paying in less, while 40 per cent of all businesses won’t pay anything extra.

Johnson told MPs: “Some will ask why we don't increase income tax or capital gains tax instead, but income tax isn't paid by businesses.

“So the whole burden would fall on individuals, roughly doubling the amount that the basic taxpayer could expect to pay, and the total revenue from capital gains tax amounts to less than £9billion this year.

“Instead we argue that we will share the cost between individuals and businesses, and everyone will contribute according to their needs, including those above state pension age, so those who earn more, will pay more.

“And because we are also increasing dividends tax rate, we will be asking business owners and investors to make a fair contribution too.

"In fact, the highest earning 14 per cent will pay around half the revenues, and no one earning less than £9,568 will pay a penny, and the majority of small businesses will be protected, with 40 per cent of all businesses, paying nothing at all.”

The SNP's Westminster leader, Ian Blackford described the NIC hike as "deeply regressive". 

He said: "Not only does it break yet another Tory manifesto pledge but it will leave Scottish families, low paid workers, and young people hundreds of pounds worse off and forced to foot the bill for Westminster failure. Worse still, it comes at the same time the Tories are slashing people's incomes by £1040 in cuts to Universal Credit.

"No one doubts the need for Westminster to fix the crisis it has created in England but it must be done in a fair way not through a regressive tax that will unfairly place the burden on Scottish families, young people and the least well off."

Labour's Shadow Scottish Secretary, Ian Murray said:“This is a regressive tax plan that will punish young people, care workers, supermarket workers and nurses.

“We should be asking those with the broadest shoulders to pay more and governments should be introducing comprehensive reforms plan for social care, not sticking plaster solutions.

“The Tories have shown their true colours and are willing to place the burden on working people and businesses, rather than fix the social care crisis.”

Read more at www.politicshome.com 

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