The Observer view on the weaknesses of Boris Johnson’s social care levy

Boris Johnson’s plan to “fix the crisis in social care” has arrived after 18 months of procrastination and decades of heartbreaking complaints from dementia sufferers and disabled people denied the care they need. A health and social care white paper is imminent, possibly before Christmas, that will explain how the crumbling patchwork of social care providers, most privately owned, will be knitted into the health system to provide a better service “once and for all”.

As a precursor, Johnson announced a levy that he said would underpin the sector’s funding and provide security for the next decade. Fairness is rightly a watchword of growing importance in politics and so the levy’s primary test was the extent to which all sections of society will contribute towards a more integrated system of health and social care.

On that measure, the levy fails, although not by as much as many feared when rumours surfaced that a hike in national insurance was all the Treasury would consider. As it is, £12bn will be raised from a 1.25 percentage point increase in employee and employer contributions from next April, accompanied by a 1.25% charge on dividend income and a 1.25% levy in 2023 on working pensioners who at the moment pay no national insurance.

一目で, the combination of charges levied on workers and pensioners seemed comprehensive. National insurance is a progressive tax if a narrow definition is applied. That is because the £9,500 income threshold means someone earning £20,000 a year will pay the levy on only half their income, while someone on £50,000 will pay it on four-fifths.

All age groups are caught, after the levy was extended to cover pensioners who work – they will pay the 1.25 levy – along with those with stock market dividend income, mainly pensioners, いつ 7% dividend tax rate increases to 8.25%.

しかしながら, this is where a sense of equity begins to break down. And the chancellor, リシ・スナック, the driving force behind the government insisting extra spending be financed through higher taxes rather than borrowing, is likely to discover its growing unpopularity once the implications begin to filter through.

To some extent, they already are. The first polls are showing that the hike, which takes the overall proportion of tax as a percentage of national income above 35% and to a 50-year high, is proving unpopular. Criticism by thinktanks on left and right of the political spectrum will have taken their toll. ザ・ Resolution Foundation said the levy falls disproportionately on the working-age population when a typical 25-year-old will pay an extra £12,600 over their working lives from the employee part of the tax rise, compared with nothing for most pensioners. Making matters worse, income from private pensions and rents will not be subject to the levy. A focus on class 1 national insurance also excludes the self-employed, thereby increasing the incentive for firms to use self-employed labour.

The taxpayers often grouped under the heading “the professional classes”, who earn more than the upper threshold for NI of £50,842, will be caught by the 1.25% levy, but will continue to be lightly taxed compared with those who earning less. The standard rate of NI is 12% and heading to 13.25%, while the upper rate is 2% and will be capped at 3.25%. It is shocking that a recent graduate earning more than £28,000 will from next year lose more than 48% of their earnings, including NI and their 9% graduate levy, while a 70-year-old on the same pay will contribute less than 24%.

Add to this what is effectively an £86,000 tax on the homes of those who need care – a charge that combines the worst of Theresa May’s “dementia tax” and a poll tax that pays ignores the value of homes in different parts of the country – and the plan begins to look toxic.

If a tax on incomes is necessary, it would be more equitable to increase income tax rates, although it would exclude employers from footing some of the bill. Fairer still would be a tax on the assets of the wealthy whose gains remain lightly taxed.

労働 appears to be inching towards this conclusion, but it knows to tread carefully after losing four elections on the trot at the hands of older voters who voted Conservative in part to protect their wealth.

There is a coalescing around equalising the tax on capital gains with income tax rates. しかしながら, those richer members of society who can delay crystallising their winnings from stocks and bonds until more favourable political times can reduce the receipts to a possibly one-term leftwing government. Better still would be to focus on the gains from property, which successive governments have protected from boom and bust through schemes such as Help to Buy, stamp duty holidays and low interest rates.

A small tax on future gains from property, いう 10%, could generate several hundred billion pounds for the exchequer over the next 20 年. It is likely that a tax on wealth will be needed in addition to higher income taxes. The Institute for Fiscal Studies said an ever-growing NHS budget could swallow up all of the extra cash, leaving little for social care, which will receive just £1.8bn of the £12bn.

Tory county councils believe it will do little to alter a financial position that means they cannot provide services for 50% of social care claimants. Rather than a landmark package that reassures the care industry and health sufferers, it looks as though Johnson has left another job unfinished.

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