The care crisis won’t be solved with tax cuts

From next week, the health and social care levy is due to kick in, meaning that national insurance contributions (NICs) will rise by 1.25%. But pressure from the government backbenches over a tax rise during a cost-of-living crisis forced the chancellor to amend plans in last week’s spring statement. When he should have been looking to raise more money for care, all we got was an ineffective tax cut that disproportionately benefits the better off. Rishi Sunak chose to raise the threshold at which people start to pay NICs to £3000 higher, in line with income tax – which will be cut from 2024.

Taxes need to rise to improve social care, which is widely acknowledged to be in crisis. Most of us will develop care needs in our lives, but too many people are locked out of accessing support or end up paying astronomical fees privately. At least 1.8 million people have unmet care needs, the quality of care is often poor and so is the quality of jobs.

NEF is arguing for a universal care service so that everyone can access the quality care they need while raising standards, pay and job quality in the sector. The money earmarked for care from the NICs rise was only 6% of what’s needed to get there, since most of revenue is due to go to the NHS. And, thanks to a last-minute amendment by the government, the money that is going to care will mainly go towards a care cap that will disproportionately benefit wealthier pensioners. In September last year, the government announced a cap on social care costs set at £86,000. Their amendment made it so that only the amount someone spends themselves, rather any council contributions, will count towards the cap. This means that those with moderate assets would have to contribute to more of their own costs for longer. Just yesterday, the government voted down a challenge from the House of Lords asking them to reconsider.

While the government haven’t yet changed the social care funding envelope, contrary to chancellor’s claim to have set up a dedicated, or hypothecated, funding stream for health and care, the pot will have to be topped up with revenue raised from elsewhere. Combined with the chancellor’s insistence on prioritising tax cuts instead of spending increases, this makes it very unlikely that they will invest sufficiently and rise to the scale of the care challenge in the future.

The government should have been looking to raise much more money for social care in a more progressive way. One option would be deeper reform of national insurance, including removing exemptions for investment income and pension earners, and taxing higher earners at a higher rate. Alternatively, funds for care could be raised by taxing income on wealth on a similar basis to earnings from work. Both would raise enough funds to get us much closer to universal care.

Far from a challenge to the cost of living, funding for care raised progressively could be part of the solution over the longer term by spreading quality employment and boosting wages nationwide. Our research shows that investing in universal care could create over a million jobs, both directly in the care sector and indirectly by freeing up those currently unable to work due to unpaid care responsibilities.

After decades of underinvestment, the care crisis won’t be solved with a chancellor ideologically wedded to cutting taxes at the expense of all else.

Image: Andrew Parsons /​No 10 Downing Street (CC BY-NC-ND 2.0)