PM faces 'significant Tory backlash' over plan to boost social care from tax increase

6 September 2021, 14:05

Boris Johnson is expected to confirm an increase in National Insurance contributions to fund his plans for social care
Boris Johnson is expected to confirm an increase in National Insurance contributions to fund his plans for social care. Picture: Alamy

By Daisy Stephens

Boris Johnson faces outcry from his own benches if he follows through with manifesto-breaking plans to increase National Insurance contributions.

A "very significant backlash" is expected in response to Boris Johnson's plans, former chancellor Lord Hammond has warned.

Defending the proposals, Tory MP Sir Iain Duncan Smith said that the social care system was in need of a complete overhaul.

"Even if you throw more money at it this system isn’t working, and it won’t work," he said to LBC's Nick Ferrari.

"It will just be more expensive but not function.

"We have to change the way we do it and modern technology gives us the ability to look after people better."

He added: "What we should be doing is discussing how to get a better system before, then discussing how much it costs and how you pay for it."

Minister for armed forces James Heappey also defended the plans, saying it was impossible to find a solution that would please everyone.

Also speaking to Nick, he said: "There’s no right or wrong answer to this.

"There is nothing that Rishi [Sunak] can say that every single politician, every single journalist, every single charity and interest group, will say 'that’s the answer'."

"As an MP that comes from a part of the world, Somerset, where the social care challenge is particularly acute, I can tell you that the current system is not working and just pumping more money into it will not be the answer," he said.

"We have got to find a way of sorting out the social contract – too many governments have ducked this for too many decades."

Read more: PM to 'use every economic, political and diplomatic lever' to help Afghans left behind

Read more: Girls Aloud star Sarah Harding dies aged 39 following battle with breast cancer

Mr Heappey went on to say that the debate should not be treated as an "intergenerational battle".

"I just think that pitting this as a sort of intergenerational unfairness doesn’t recognise that there are elderly people that struggle and need support just as much as there are young people that struggle and need support," he said.

"The social contract in the UK is broken. It needs to be transformed. We need to get on with doing it."

He added: "If we can’t do it with a majority of 80, when can you?"

Former minister Jake Berry, leader of the Northern Research Group of Tory MPs, warned against a policy which appeared aimed at elderly voters in affluent southern seats.

The Rossendale and Darwen MP said: "It doesn't really seem to me reasonable that people who are going to work in my own constituency in east Lancashire, probably on lower wages than many other areas of the country, will pay tax to support people to keep hold of their houses in other parts of the country where house prices may be much higher."

Another former minister, Sir John Redwood, warned against a "stupid" tax rise.

"A tax on jobs when you want to promote more and better paid employment is particularly stupid," he said.

Sir John added that "if an elderly person goes to live permanently in a care home it often makes sense for them to sell their former home".

"Otherwise it would cost them money to pay the tax on it whilst unoccupied and in need of maintenance."

The Prime Minister remains locked in talks over how to fund social care reforms as Tory grandees warned hiking National Insurance would unfairly hit young and lower income workers.

Mr Johnson, Health Secretary Sajid Javid and Chancellor Rishi Sunak have been thrashing out the details, with Downing Street sources saying a day for the announcement was yet to be confirmed.

But reports suggested that £5.5 billion more funding has been agreed for NHS shortfalls later this year, including to help clear the backlog caused by the coronavirus pandemic.

Read more: Heathrow passengers caught in 'unacceptable' queues for another day

Read more: Western news websites 'infiltrated' by pro-Russian trolls - researchers

Lifetime contributions on care will be capped at about £80,000 and National Insurance will be increased by 1.25 per cent to raise between £10 billion and £11 billion per year, according to The Sunday Times.

Lord Clarke, the Conservative chancellor between 1993 and 1997, said there are "problems with national insurance" that should be tackled while raising it.

He told LBC it is "too heavily weighted on the lower paid" and there is "no reason" why people who continue to work after the state pension age no longer pay it.

Read more: Young footballer dies after suspected cardiac arrest at FA youth cup match

Read more: Brits to bask in glorious sunshine as forecasters predict highs of 29C

Conservative former prime minister Sir John Major warned against the move targeting workers and employers by arguing it is "regressive".

Instead he called for Mr Johnson to take the "straightforward and honest" approach of increasing general taxation.

Economic think tank the Institute for Fiscal Studies suggested that increasing basic and higher rate income tax by just under 1.5 percentage points would raise a similar amount to a one percentage point hike in National Insurance contributions (NICs) and would spread the burden across the generations.

IFS senior research economist Stuart Adam said: "Choosing to increase NICs rates would mean that just 1.4 per cent of additional revenue came from families that contain a pensioner - who now make up 23 per cent of all families.

"In contrast, these families would contribute 13.8% of additional revenue if the basic and higher rates on income tax were increased."

Ministers have also privately acknowledged their opposition to the proposal, while Commons Leader Jacob Rees-Mogg appeared to show his disapproval in his "weekly wisdom" column in the Sunday Express.

He cited George Bush Sr's promise not to create new taxes in his successful bid to be US president, before he went on to raise taxes and lose the next election to Bill Clinton.

Any increase in taxation will breach the 2019 Conservative manifesto
Any increase in taxation will breach the 2019 Conservative manifesto. Picture: Alamy

A second electoral promise may be broken in swift succession, with ministers reportedly preparing to announce that the state pension triple lock will be temporarily replaced with a "double lock".

This is because distortions to wages during the coronavirus crisis could mean pensioners would get a payment rise of as much as 8%, while workers face tighter times.

However resistance from ministers may be damped by speculation about a looming Cabinet reshuffle.

Read more: Brazil v Argentina World Cup qualifier descends into Covid-19 farce with game abandoned

Read more: Leo Varadkar attends London festival despite ongoing restrictions in Ireland

Any increase in taxation would be a breach of the 2019 Tory manifesto, which contained a personal "guarantee" from Mr Johnson not to raise income tax, VAT or National Insurance.

Labour has voiced its opposition to an increase to National Insurance, but leader Sir Keir Starmer will come under pressure to set out how he would fund social care reforms.