- Emma Walsh
Boris Johnson outlines new 1.25% health and social care tax to pay for reforms
A new health and social care tax will be introduced across the UK to pay for reforms to the care sector and NHS funding in England.
Boris Johnson said it would raise £12bn a year, designed to tackle the health backlog caused by the Covid pandemic and to bolster social care.
He accepted the tax broke a manifesto pledge, but said the "global pandemic was in no one's manifesto".
However, Labour leader Sir Keir Starmer said the plan was a "sticking plaster". Leaders in social care also warned the money was "nowhere near enough" and would not address current problems.
The tax will begin as a 1.25 percentage point rise in National Insurance (NI) from April 2022, paid by both employers and workers, and will then become a separate tax on earned income from 2023 - calculated in the same way as NI and appearing on an employee's payslip.
This will be paid by all working adults, including older workers, and the government says it will be "legally ring-fenced" to only go towards health and social care costs.
Income from share dividends - earned by those who own shares in companies - will also see a 1.25% tax rate increase.
The Institute for Fiscal Studies said the latest tax increases amounted to £14bn. Together with those announced in the March Budget, it said, 2022 had seen the highest tax rises in 40 years.
The UK-wide tax will be focused on funding health and social care in England, but Scotland, Wales and Northern Ireland will also receive an additional £2.2bn to spend on their services.
The SNP said the tax would "unfairly penalise Scottish families - and leave the poorest in society subsidising the wealthy".
MPs will vote on the new proposals in the Commons on Wednesday.
Mr Johnson said the proceeds from the tax would lead to £12bn a year being raised, with the majority going into catching up on the backlog in the NHS created by Covid - increasing hospital capacity and creating space for nine million more appointments, scans and operations.
A portion of the money - £5.4bn over the next three years - will also go towards changes to the social care system, with more promised after that.
A cap will be introduced on care costs from October 2023 of £86,000 over a person's lifetime.
All people with assets worth less than £20,000 will then have their care fully covered by the state, and those who have between £20,000 and £100,000 in assets will see their care costs subsidised.
Where's the £36bn going?
The government are raising about £12bn a year for three years with these tax rises
Just over £2bn of that goes to Scotland, Wales and Northern Ireland under rules on how UK government spending is split.
That leaves £10bn a year for health and social care in England. Most, but not all, of that has been earmarked against particular parts of health and social care.
About £6bn a year has been earmarked for the NHS.
Another nearly £2bn a year will go to social care.
A bit less than half of that will go towards the new funding model (helping people to pay for care) and a bit more than half going on delivering care - training for staff, support for councils and work on making the care and health services work better together.
Some of the remainder will be spent on tax. The Department of Health and Social Care, and the NHS, are big employers and so a tax rise for employers will mean they have to pay more.
But there's still at least £1bn increase in the DHSC budget that goes into "other" with the government saying they'll announce further details in the coming weeks.
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