Senior Tories warn ‘regressive’ tax rise fails to solve social care problems

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Boris Johnson’s “regressive” £12 billion tax rise will not fix social care and further punishes businesses, senior Tories have warned.

Chancellor Rishi Sunak was also urged to use this month’s Budget to deliver a “very generous settlement” to ensure hard-pressed local authorities can provide the required services.

The warnings came as the House of Lords approved the Health and Social Care Levy Bill, which will help to enact the Prime Minister’s plans of a 1.25 percentage point increase in national insurance from April 2022.

Conservative Party Conference
Prime Minister Boris Johnson (Stefan Rousseau/PA)

Conservative former cabinet minister Lord Forsyth of Drumlean said: “I very much welcome the Prime Minister’s determination to fix social care.

“This bill, however, does not do that. It’s a bit like going into a restaurant and being presented with the bill for the meal before you’ve even seen the menu.”

He added: “What it does do is massively increase the regressive nature of the taxation system because it places the burden on those who have least, not those who have most.”

Lord Forsyth asked what the Government intends to do for local authorities, adding: “I’m assuming if we’re really going to fix social care that the Chancellor is going to make a very generous settlement to local authorities in order for them to provide the means that they need to deal with this problem now.”

After one peer remarked this is “unlikely”, Lord Forsyth joked: “Have faith.”

The policy, which includes capping the total lifetime cost of care in England at £86,000 from October 2023, is also intended to generate funds to help deal with the NHS backlog.

Conservative former health secretary Lord Lansley expressed concerns over a national insurance rise.

He said: “It’s a tax on jobs, and for this to be happening in the week after the Prime Minister has told the business community they’re going to have to pay higher wages, they might as well be saying ‘if we have to pay higher wages, you might not impose upon us additional costs of employing people’.”

Conservative former health minister Lord Bethell (PA)

But he added that he was pleased to support the bill, explaining: “My biggest concern when I was on the frontbench is that we wouldn’t address these issues at all.

“I was concerned it’d be lost in a political quagmire as I don’t see any form of political consensus about any of these ideas.”

Independent Crossbench peer Lord Macpherson of Earl’s Court, a former Treasury permanent secretary, also offered his support to the bill but said “flaws” in the levy’s design need to be addressed.

Lord Macpherson said: “I fully understand that taxing employers is easier politically, they don’t have many votes.

“But as always with tax, there’s no free lunch. Employers’ national insurance is a tax on jobs. Tax more in employment and you get less of it.”

He added: “The Chancellor has announced over £40 billion of tax increases this year, nearly two-thirds of these will be borne by business in the form of higher corporation tax and national insurance.

“That may be good politics, but at a time when Brexit has made it more important than ever that the UK is business-friendly, it is almost certainly bad economics.”

Labour’s Treasury spokesman Lord Eatwell earlier said the proposals are “ill thought-through, are unfair and have potentially serious macro-economic consequences”.

For the Liberal Democrats, Baroness Brinton warned that the plan was “totally upside down and back to front” as she called on the Government to “urgently engage in cross-party talks on the wider future of social care”.

Treasury minister Lord Agnew of Oulton said Mr Johnson’s policy was “responsible and fair”.

He told peers: “This levy will enable the Government to tackle the backlog in the NHS, it will provide a new permanent way to pay for the Government’s reforms to social care and it will allow the Government to fund our vision for the future of health and social care in this country over the longer term.”

The Bill later cleared the Lords and will become law once it receives royal assent.

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