Boris Johnson’s big tax-and-spend gamble

LONDON — Boris Johnson is getting back in business of governing — but not everyone’s convinced.

Ignoring the noises off of his own MPs, and even anonymous sniping from Cabinet ministers, the U.K. prime minister on Tuesday rolled the dice with a manifesto-busting tax rise to address a crunch in Britain’s health and care system.

“We will remove the anxiety of millions of families up and down the land by taking forward reforms that have been delayed for far too long,” Johnson told a press conference Tuesday evening.

Yet with some of his own party lining up against the plan, the opposition Labour Party spying a broken promise, fiscal experts questioning its fairness, and health care leaders arguing it won’t go far enough, the wheels of Johnson’s first big domestic policy move could yet come off. 

Johnson’s predecessors’ bear the scars of their attempts to fix the U.K.’s chronically under-funded system of social care, which is supposed to provide day-to-day support for elderly and vulnerable adults but is straining under rising demand and patchy provision.

His immediate predecessor Theresa May lost her party’s majority after laying out its blueprint to fix the problem with a proposal swiftly dubbed the “dementia tax” after May initially set no limit on the amount people have to pay towards their own care costs. Former Tory leader David Cameron did little to follow up on a wide-ranging 2011 review of the system.

But after two years in office dominated by the twin crises of Brexit and the coronavirus pandemic, Johnson hopes to seize the political initiative and is gambling on fixing an issue that has plagued politicians of all stripes.

‘Pretty bumpy’

The move is a particularly un-Conservative one. Johnson, leader of the traditionally center-right and low-tax party, is implementing the biggest hike in personal taxes in decades. Every British worker is set to see a 1.25 percentage point hike in their National Insurance — an effective income tax that’s earmarked for state benefits — to pay for the £12 billion-a-year package. A similar percentage point hike to a dividend tax will also be imposed.

“The Downing Street gamble is rooted in the idea that the political consensus in this country has changed, and people have an even greater appreciation of the value of healthcare, but also a greater appreciation of the contribution that social care can make to dignity in old age and are therefore going to be prepared to contribute more to try to make it more sustainable,” Paul Harrison, former press secretary to May said.

Polls suggest some public support for the tax hike. A snap YouGov survey following the announcement Tuesday found 44 percent of those polled support or strongly support the rise, compared with 43 percent of people of those who oppose or strongly oppose it.

The prime minister won over his Cabinet Tuesday morning, when he presented the plan, and MPs will hurriedly vote on the proposals in the House of Commons Wednesday.

Harrison, the former No. 10 press aide, pollster, predicted it could be “pretty bumpy” for a while. But, he argued, not announcing the plan in the “white heat” of an election campaign could help, and potentially allow Johnson to claim the mantle of Labour leaders Gordon Brown and Tony Blair who “made a virtue of extra NHS spending.” 

“If you can prove the value of that investment then the difficulty of raising tax becomes a bit less,” Harrison added.

The devil will, as ever, be in the details.

While billed as the hotly anticipated social care reform package the country was promised, the majority of the £36 billion in extra cash over three years will help to tackle record waiting lists in the National Health Service instead. A little under 15 percent, or £5.4 billion, will actually go to social care, or £1.8 billion a year.

The “broken social care sector will be feeling short-changed and bitterly disappointed,” by today’s offering, said Natasha Curry, deputy director of policy at the Nuffield Trust think tank. These funds “will only go some of the way to stabilize a dire situation and leaves little for meaningful change.”

Curry warned that the most immediate challenges for the sector will not be resolved by the package, which comes into effect next April.

Care staff have faced an extremely challenging 18 months amid the pandemic, with many leaving the sector altogether. Low wages; better offers in the hospitality sector; mandatory vaccinations; the loss of EU citizens from the workforce; and an immigration policy that precludes most care staff all combine for a perfect storm of stretched staff. It all comes as winter approaches, Curry notes. A separate adult social care white paper is supposed to address recruitment, but there’s still no timeline for its publication.

Jeremy Richardson, chief of Four Seasons Healthcare, one of the U.K.’s largest independent care-home providers, welcomed the government’s “intent,” but wants to see the receipts. Definitions of what is and isn’t covered “could cause confusion for families,” he warned.

And, he said, families seeking care between now and 2023 “could also face the double hit” of uncapped care costs (an £86,000 personal spending cap does not come into effect until October 2023), while also bracing for the increased National Insurance payments. Currently, anyone with assets over £23,250 meets their own care costs in full — and around 1 in 7 people pay over £100,000.

The most pressing concern, according to the Local Government Association, which pays care homes for their services, is greater information “on what proportion of the new levy will come to social care, including when and how the funding will be distributed,” said James Jamieson, chair of the association. He wants the government’s upcoming public spending review to “set out how immediate and short-term pressures will be addressed.”

Former Liberal Democrat MP Norman Lamb, who has long campaigned to improve the care sector, warned that the government needs to be clear about what exactly it’s trying to achieve with the reforms. “It should not be a paternalistic service delivered to passive people through care homes,” he warned. While applauding the government for “confronting the funding requirement” he urged politicians from all parties to engage in the detail. “This is a once-in-a-lifetime opportunity to get this right,” he said.

‘Borne by workers’

Johnson will also find out whether voters agree with claims that using a hike in National Insurance — asking those in work to meet costs largely borne by the elderly — is intrinsically unfair.

Paul Johnson, director of the Institute for Fiscal Studies think tank, said despite plans to extend the levy to those over state pension age, and to dividends, it remains “a tax which will be overwhelmingly borne by workers with very little coming from pensioners.” 

The opposition Labour leader Keir Starmer said those with the broadest shoulders should pay more. Trade unions want a capital gains tax hike. Johnson retorted by accusing Starmer, relatively new to the job, of having no plan of his own.

Johnson’s Conservative colleagues meanwhile fear the manifesto could have longer-term consequences for the party’s reputation.

Johnson won the 2019 election by promising not to raise income tax, National Insurance or VAT — but he’s counting on the shock of the pandemic to help make the case for a hike.

Speaking at No. 10 press conference Monday evening, he offered only an “emotional commitment” not to impose further tax rises. His ambitious chancellor, Rishi Sunak, put it more plainly: “None of us standing here wants to be in a situation where we have to raise taxes — but I think the health secretary set out a powerful rationale for why extra investment is needed, which I think people will understand.”

Yet to some in the party, it’s a high-risk strategy. Former Foreign Secretary William Hague, also a former leader of the Conservative Party, told Times Radio the Conservatives now risk being defined by tax increases, and said the government had to offer “some hope … for people that there’s some way to lower taxes in the future to a better performing economy.”

“Unless they really get that point across and put a lot of effort behind that, [and] they get themselves defined by that, they’re going to end up being defined by raising one tax after another,” he said. “And that shouldn’t really be where the Conservative Party is.”



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