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Parliament votes to increase National Insurance as part of health and social care tax reform

MPs have voted to approve a major health and social care levy to be funded via tax hikes.

Tax payers face a rise to their National Insurance to pay for the social care system in what is being billed as the "biggest social care reform in the NHS' history".

Prime Minister Boris Johnson (49407083)
Prime Minister Boris Johnson (49407083)

MPs voted 319 to 248 for a 1.25 percentage point rise in contributions for workers and employers.

During a House of Commons debate, some Conservative MPs raised objections to the proposals and an amendment by Labour was also voted down.

But Prime Minister Boris Johnson hopes the tax increase, which breaks a Conservative manifesto pledge, will raise £12bn a year and help clear backlogs caused by Covid-19.

The Government has previously pledged to invest £36 billion over the next three years to help the NHS recover from the coronavirus pandemic and reform the adult social care system.

In an earlier Commons statement, the Prime Minister announced the new UK-wide 1.25% health and social care levy based on National Insurance contributions.

The current National Insurance rate on earnings under £50,000 is 12%, with a further 2% applied to all earning over £50,000, meaning any increase has a proportionately lower impact on higher earners.

The hike means this would increase to 13.5% and 3.5% respectively.

He said the additional revenue would pay for the biggest catch-up programme in the history of the NHS in England, with £12 billion a year to help deal with the backlog of cases built up during the pandemic.

It will also cover the reform of the social care system in England, ending what Downing Street described as “unpredictable and catastrophic” care costs faced by many families.

From October 2023, anyone with assets under £20,000 will have their care costs fully covered by the state, while those with between £20,000 and £100,000 will be expected to contribute to their costs but will also receive state support.

No-one will have to pay more than £86,000 for care costs in their lifetime.

The reforms were billed as the biggest in the NHS' history. Picture: PA
The reforms were billed as the biggest in the NHS' history. Picture: PA

Scotland, Wales and Northern Ireland will receive an additional £2.2 billion in additional health and social care spending from the levy.

In addition to the health and social care levy, there will also be a 1.25% increase in the dividend tax – to ensure those who receive their income from shares also contribute.

Initially, National Insurance contributions will increase by 1.25% from April 2022 as systems are updated.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips.

It will be paid by all working adults, including those over the state pension age – unlike other National Insurance contributions.

Downing Street said that a typical basic rate taxpayer earning £24,100 would contribute £3.46 a week, while a higher rate taxpayer on £67,100 would pay £7.15 a week.

The Prime Minister’s official spokesman said that only a broad-based tax like National Insurance or income tax could raise the kind of sums needed to deal with the problem.

He argued that National Insurance represented a fairer solution as employers – who also benefited from a healthy workforce – would contribute.

“This is a progressive and fair way to raise money,” the spokesman said.

Ashford Tory MP Damian Green said: “There has been much debate about how the money will be raised; but I think there is more concern about how the money is going to be spent.

"My fear is that once you start spending on perfectly proper things like the NHS back log, there will never come a point when there is enough money in this fund to be transferred to the social care sector.

"You cannot spend the first pound twice; can the Prime Minister assure me that the care sector will see a significant uplift in its support in the immediate future?”

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