Johnson to break campaign tax promise to fund welfare reform
UK Social Services Updates
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Boris Johnson is about to break his pledge in the electoral manifesto not to raise tax rates in order to continue the much-heralded overhaul of the UK’s crisp social protection offer.
The Prime Minister is finalizing a reform program that would see taxes increase to address weaknesses in the social protection system. Ministers are drawn to proposals to fund the changes with an increase in national insurance, which the 2019 Conservative manifesto pledged not to do.
Johnson was set to strike a deal on social care reform with Chancellor Rishi Sunak and Health Secretary Sajid Javid in July, before ministers were cracked by the Covid tracking app.
The Prime Minister’s allies hope that an agreement can be found soon to announce the reforms in the coming days. One said it was “ambitious but possible” for a deal to be unveiled next week.
The Treasury has worried about the budgetary costs of a large social protection program and has sought, in heated negotiations between ministers, to ensure that the funds raised by any tax increase are sufficient to offset the new spending. .
Last minute discussions focus on finalizing how the reforms will be financed. Those who knew about the plans said tax hikes were “inevitable.” A Whitehall official said: “When you do something as huge and important as fixing the welfare system in the long run, you have to pay for it somehow.”
A government spokesperson declined to comment on the nature or timing of any announcement. “We are committed to presenting a long-term plan to reform the social protection system and we will present proposals this year.”
With the total cost of the social protection program likely to be around Â£ 10bn per year when fully implemented, this would require a 2p per pound increase in national insurance, with an additional 1p being taken from the employee and employer rates.
The increase in national insurance will be greeted with hostility by Conservative MPs, who fear the party will jeopardize its reputation for fiscal prudence. Sir John Redwood, former cabinet minister, called NI’s proposal a “bad idea”.
Dominic Cummings, Johnson’s former chief adviser, warned voters would not forgive the government for breaking tax commitments and called the NI increase “a terrible way to do it.”
“Why should middle-income and below-average youth lose their disposable income to pay another subsidy for the older middle class? This is bad policy and bad policy, âhe wrote in a Blog.
Many treasury officials are aware of the downsides of using national insurance as a way to fund better social care because retirees don’t pay for it, but their political leaders are drawn to the idea that people might think that national employers’ insurance would be paid for by other people. and cite the difficulty of using income tax to finance social care when it is a devolved tax in Scotland.
The social protection reform plan will have to strike a delicate balance between limiting the amount of individual contributions through a ceiling with additional funding from the state.
The Treasury has long argued that the government should not be more generous than the policy of the coalition government agreed in 2013 that the ceiling for social care costs should be Â£ 72,000, a figure that would be Â£ 80,000 after adjusting for inflation.
Health experts have also questioned whether the additional funding referred to would be enough to address deep-rooted issues in the NHS.
Richard Sloggett, former policy adviser to Matt Hancock, the former health secretary, suggested that the funding raised from an NI increase “would solve some of the problems that have been exposed by Covid, in terms of the backlog of care, and would meet the social protection commitments in the 2019 conservative manifesto which had to be frozen due to the pandemic â.
But other key sticking points remain, such as the need for a properly funded plan to deal with the service’s workforce crisis, he added.
Business groups, including the Federation of Small Businesses, pleaded with Sunak not to introduce a “devastating” increase from NI, warning that the “jobs tax” would destabilize businesses struggling to recover from the pandemic.