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TThe Conservative government is reportedly considering an increase of up to 1.25 cents in national insurance contributions for 26 million working people to help cover the costs of repairing Britain’s crumbling welfare system. The party hopes that the victory of the “resolution” of the social services crisis will prevail over the political betrayal of breaking a clear promise to freeze national insurance. But the proposed funding option is unfair, with assets supposedly subsidizing wealthy seniors. If the Labor Party is sharp, it can achieve a great political victory here – and show itself as the party with the just, long-term solutions to a crisis that has been brewing for a decade.
The Tories launched the 2002 increase in the number of Labor in the NICs as a precedent, with public reaction at the time being rather mixed. But the circumstances were very different. The Labor Party has not broken a clear promise to push through its 1p hike. Real wages and salaries in 2002 had been on the rise for a decade. And the NIC hike was made to pay for the National Health Service.
On the other hand, any increase in NICs is a violation of a categorical promise in the 2019 manifesto, signed by the Prime Minister himself to “not increase the rate of income tax, VAT or national insurance “. Blaming Exceptional Coronavirus Circumstances Does Not Free Government: Covid has made the problem worse, but social services have been in a funding crunch for years – otherwise why would Johnson have promised to fix the problem in 2019?
Nor have most people enjoyed a long period of constant improvement in their standard of living that makes them more inclined to be generous. Real wages, just before the pandemic, were still below the peak reached under the last Labor government. Conservative-led governments have delivered a lost decade for incomes, especially for young people.
And while the NHS is popular in part because it operates on a simple principle – to provide quality health care to all who need it – social care delivery today is anything but. A tangle of private and public benefits, billing complexities and funding gaps have created a system in which around 1.5 million people are deprived of the care they need while the caregivers themselves are grossly underpaid. and underfunded. Meeting future demand and properly paying caregivers will require an additional £ 14.4bn per year by the end of the decade, more than what is likely to be generated by this increase.
The government’s preferred solution to individual delivery costs, as proposed in the 2011 Dilnot Commission recommendations, is to cap the individual’s contributions at £ 80,000. This is medically correct, as it prevents those with complex end-of-life social needs from suffering from them. The Conservatives’ 2017 proposal to make those receiving care potentially bear the brunt of the high costs was effectively (and correctly) denounced by Labor as a ‘dementia tax’.
But cost caps also mean that those who own valuable properties receive an unexpected free gift at the end of their life, shielding the value of their properties from the potentially rising costs of their care. If this is funded by a tax increase on all employees, as the increase in the NI will require, it is grossly regressive. This will mean that poorly paid young workers will subsidize wealthy older people – retirees themselves being entirely excluded from NA payments. A nurse with four years of experience, for example, could pay up to £ 220 more per year from a 1 pence increase. But the lowest paid workers will be hit particularly hard, facing both an increase in NICs and the proposed universal credit cut of £ 20. There is no good reason to accept NIC increases as a solution to finance social care, and Labor should be firing on all cylinders.
However, after opening the door to tax hikes, the Conservatives also pulled this particular grindstone from Labor’s necks. Much of the current social service funding crisis dates back to 2010, when the Tories opened cross-party funding talks just before the May election to pillory the then Health Secretary’s proposals. , Andy Burnham, as a “death tax”. It helped them get into government and scare Labor away from long-term funding solutions for social care, even under the leadership of Jeremy Corbyn.
But with the Tories preparing to ditch an unpopular and regressive tax on 26 million employees, Labor should seize the opportunity to advocate for alternative financing. Options abound, all capable of closing the gap. Closer to the current proposals, the New Economics Foundation has proposed removing the upper income limit, which currently charges those who earn more than £ 46,000 a year a 2p tax on those additional earnings, compared to the standard rate. of 12.5 pence. The director of the center-right think tank Bright Blue has suggested charging the estates of social service users, as has Andy Burnham. Equalizing capital gains tax and income tax, as Tory Chancellor Nigel Lawson did in 1988, would raise around £ 90 billion over five years. The most radical of all, but extremely popular with the public – including conservative voters – are the proposals for a true wealth tax. Last year’s LSE / Warwick commission estimated that a 1% tax on millionaires would raise £ 260 billion over five years.
There are serious fundraising solutions to this crisis, and the opportunity for Labor to show that it will protect workers’ incomes from two-sided Conservative governments. But will the party seize the moment?
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