Boris Johnson announces National Insurance rise of 1.25pc, including for pensioners, plus dividend tax increase

 Boris Johnson announces National Insurance rise of 1.25pc, including for pensioners, plus dividend tax increase

Boris Johnson has announced a 1.25 per cent tax hike to fund landmark reforms of England’s adult social care system and a backlog of NHS appointments.

Tuesday’s announcement, which is the biggest shake-up of social care in decades, will provide means-tested social care funding for people with assets between £20,000 and £100,000 for the first time.

People with savings of more than £23,250 currently receive no support from the Government to pay for the cost of social care.

Those with savings of less than £20,000 will receive fully-funded care, while those with savings between £20,000 and £100,000 will be given partial support.

No one will be required to pay more than £86,000 for social care in their lifetime, under a new cap introduced from October 2023.

The reforms will be paid for with an increase to national insurance, which is levied on anyone who earns more than £9,564 per year. 

Mr Johnson said the policy would remove an “anxiety affects millions of people up and down the country” that “a condition like dementia, nature’s bolt from the blue, could lead to the total liquidation of their assets, their lifetime savings, their home, the loss of everything that they might otherwise pass on to their children”.

He told MPs: “A universal system of free care for all would be needlessly expensive when those who can afford to contribute to their care should instead. 

“The state should target itself, by protecting people against the catastrophic fear of losing everything, to pay for the cost of their care,” he said.

The money raised will partially be diverted to the NHS until mid-2025, as £36 billion is funnelled to the health service to reduce backlogs and waiting lists created by the coronavirus crisis.

Extra money will also be sent from Westminster to Scotland, Wales and Northern Ireland, which Mr Johnson said would receive more money they paid in, in a “union dividend”.

Mr Johnson said that while the backlogs would “get worse before they get better,” the additional funding would help “your neighbor who has problems with their heart and needs a pacemaker [or] your friend at work who thinks that they should get that lump checked out.”

He said the announcement would launch the “biggest catchup programme in NHS history,” by “increasing hospital capacity to 110 per cent and enabling 9 million more appointments scans and operations”.

More money will also be spent on the training and hiring of care staff, while local authorities will receive an “uplift” in funding from central government they spend on care services.

The additional tax will also be levied on people who receive income from share dividends.

People who work after the state pension age will also be told to pay 1.25 per cent.

A typical basic-rate taxpayer will pay around £180 per year under the scheme, while higher rate taxpayers will pay £700.

The Government has been criticised for raising the additional revenue from national insurance contributions, which are levied on more low-paid workers.

But Downing Street said its funding model was a “progressive and fair way to raise money,” and pointed to figures showing top rate taxpayers, who make up 2 per cent of those affected, will be contributing around one fifth of the total tax paid.

The top 14 per cent of earners will pay around half of the cost, Mr Johnson’s spokesman said.

From April 2022, employees will begin to pay the levy through an increase in their national insurance contributions. From April 2023, the levy will be listed as an additional line in workers’ pay slips.

The 1.25 per cent increase will also be levied on employers, which Downing Street said would reduce the impact on individual workers’ salaries. Income tax, which has been suggested as another way to raise additional tax revenue, is only levied on employees.

It is understood that around 70 per cent of the additional costs for employers will come from the biggest 1 per cent of businesses.

Current rules on housing assets, which prevents people who receive care at home from having to sell their houses, will remain.

The Government will be required to pass legislation to bring forward its reforms.

But Mr Johnson is facing a rebellion from senior Tory backbenchers, who say the national insurance increase is a breach of the Conservative Party’s 2019 manifesto, which promised to keep contributions at current levels.

Mr Johnson said he “accept[s] that this breaks a manifesto commitment, which is not something I do lightly”.

“But a global pandemic was in no one’s manifesto,” he said. 

Around half the Cabinet is thought to have objected to the proposals, but ministers not involved directly in the plans were not presented with the details until Tuesday morning.

Mr Johnson’s spokesman described the mood in Cabinet as “positive”, and denied suggestions that the Prime Minister had used the spectre of a reshuffle to keep ministers in line.

Three former Tory chancellors and the former Conservative Prime Minister John Major have objected to the plans.

Lord Hammond, Theresa May’s chancellor, said the increase is “asking young working people, some of whom will never inherit the property, to subsidise older people who’ve accumulated wealth during their lifetime and have a property.”

“On any basis, that has got to be wrong,” he told The Telegraph.

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