“Health and social care levy” introduced to address funding crisis

“Health and social care levy” introduced to address funding crisis

Prime Minster Boris Johnson has today introduced a “health and social care levy” to ringfence taxpayer funding for the NHS and social care. 

Mr Johnson was anticipated to break the manifesto promise of no increases to income tax, VAT or National Insurance as he leads efforts to address the shortfall in funding for key services, acknowledging in Parliament today that “this breaks a manifesto commitment, which is not something I do lightly but a global pandemic was in no-one’s manifesto”.

The levy, which will be introduced in stages, and according to the PM will raise £36bn for frontline services over the next three years in the “biggest catch-up programme in the NHS’s history.”

The tax will begin as a 1.25% rise in National Insurance from April 2022 and the tax on share dividends will also go up by 1.25%. From 2023 it will become a separate tax on earned income appearing on payslips as “Health and Social Care Levy,” compared to the similar ability councils have to raise extra money through an “adult social care precept” since 2015. The anticipated inclusion of those working above state pension age has also been confirmed.

When it comes to social care the current set up sees anyone in England with assets over £23,250 pay for their care in full. In 2011, the independent Dilnot Commission estimated that around one in ten adults aged 65 face lifetime costs of more than £100,000. 10 years later that estimate is now one in seven.

In “Build Back Better: Our plan for health and social care” the government reveal its intention to

“invest £5.4 billion in adult social care over the next three years to deliver… funding and system reform commitments.

To begin this transformation in adult social care, the Government will:

a. introduce a cap on personal care costs;
b. provide financial assistance to those without substantial assets;
c. deliver wider support for the social care system, particularly our brilliant social care staff; and
d. improve the integration of health and social care systems.”

Going forward from October 2023 a cap of £86,000 across a person’s lifetime will be introduced to reduce the risk of “unpredictable or unlimited care costs.” Anyone with less than £20,000 of assets will get free care and people with less than £100,000 of assets will see their care costs subsidised, 4 times the current limit of £23,250.

If total assets are above £100,000 then care fees must be paid in full to the £86,000 cap.

In response to the announcement, Emily Deane, Technical Counsel at STEP, said:

“We welcome any commitment to tackling social care funding and hope today’s proposals will help give people certainty so they can plan for the dignity they deserve in later life. We look forward to seeing the detail of the government’s plans.

“However, any additional funding needs to go hand in hand with an overhaul of the complex laws that govern care funding, which amounts to a postcode lottery based on the attitudes of local authorities.

“Uncertainty over care funding, plus the complexities of the current system, means that many elderly people worry about their future care. We hope that today’s announcement will help allay these fears. Clarity about social care funding would also reduce the opportunities for unscrupulous advisers exploiting this situation, either by charging exorbitant fees or promoting schemes that are unlikely to work.”

Jim Boyd, CEO of the Equity Release Council, commented:

“We welcome the Prime Minister’s commitment to address social care funding, which is one of the major domestic issues of our time.

“One of the challenges with increasing National Insurance contributions to plug the social care funding gap is that the cost will disproportionately impact working age people, but to achieve a sustainable solution, it must be fair across all generations.

“Our research has found that the impact of the pandemic has meant two in three (67%) over-50s are determined to receive care at home. To fund long-term care, nearly half of UK adults (47%) back the idea of state funded social care being available to all, up to a certain level, with the option to top this up using their own finances*.

“Enabling people to use assets like property wealth will also play an important supporting role by helping some people fund additional care or modify their homes to fulfil their desire to stay living independently in their homes where possible, while also shouldering care costs from younger generations.”

Source* Equity Release Council report,Solving the social care funding crisis: perspectives on the contribution of property wealth, supported by Pure Retirement and My Care Consultant  

TWP Main Admin