The new social care levy and an imminent cut to Universal Credit will push thousands in Southwark further into working poverty and food bank reliance, say Labour MPs who blasted the ‘care-less’ tax as a ‘gimmick that hits low paid workers the hardest’.
Last week Boris Johnson U-turned on his election pledge and announced he was raising National Insurance to get the NHS back on track and cut the ‘catastrophic’ cost of care for families who often lose their life-savings and are forced to sell homes to pay for a loved ones care.
Under the new plans, employees, employers and the self-employed will pay 1.25p more in the pound for National Insurance from April 2022 but, come April 2023, the extra tax will be collected as a new Health and Social Care Levy and, unlike National Insurance, it will also be paid by state pensioners who are still in work.
Only earners taking home less than £9,564 a year, or £797 a month, will neither pay National Insurance nor the new levy.
In a huge break from traditional Conservative policy, taxes and public spending are now at their highest level since the war.
“We know we can’t rely solely on private insurance because demand would be too low for insurers to offer an affordable price,” Johnson told the House of Commons on Tuesday, September 7, as he outlined his plans to fix the broken social care system, two years after first promising reform.
“And a universal system of free care for all would be needlessly expensive, when those who can afford to contribute to their care should do so.
“Instead the state should target its help at protecting people against the catastrophic fear of losing everything to pay for the cost of their care, and that is what this government will do.
“We are setting a limit on what people can be asked to pay, and we will be working with the financial services industry to innovate and help people to insure themselves against expenditure up to that limit.
“Wherever you live, whatever your age, your income or your condition, from October 2023 no-one starting care will pay more than £86,000 over their lifetime, and no-one with assets of less than £20,000 will have to make any contribution from their savings or housing wealth – up from £14,000 today.
“Meanwhile anyone with assets between £20,000 and £100,000 will be eligible for some means-tested support.
“And this new upper capital limit of £100,000 is more than four times the current limit, helping many more people with modest assets.
“And as we fix this long-term long-standing problem in social care, we will also address the fears that many have about how their loved ones will be looked after, by investing in the quality of care, in carers themselves, and by integrating health and care in England so older people and disabled people are cared for better, with dignity, and in the right setting.”
The new levy is expected to raise £12 billion a year for the NHS to clear its immediate backlog, before a chunk is ring-fenced for social care. Even so, this proportion is only due in three years time, and details of exactly how much will be put aside are sketchy.
Criticisms from Labour MPs have focused on how the rise disproportionately targets the lowest earners while the wealthiest stand to benefit the most, as lower and middle earners lose a greater proportion of their salary to National Insurance than earners who take home over £50,000 a year. It has been estimated 2.5 million people across the country will now be £1,000 a year worse off due to the hike.
The plan has also been criticised for failing to address chronic issues in the care sector, including staff shortages and ‘poverty pay’. In parliament, Dulwich and West Norwood MP Helen Hayes, said: “It is telling in the prime minister’s statement there was not a single word of tribute to our extraordinary social care workforce, or any mention of the pay increase they so desperately need.”
Bermondsey and Old Southwark MP Neil Coyle said: “Social care needs a complete overhaul, not just a Johnson-Tory gimmick that hits low paid workers hardest. Full reform was promised and is much needed.”
A new analysis from the Labour Party shows that the combination of the new social care levy and Universal Credit cut would see the average social care worker, nurse, teaching assistant or supermarket worker £1,100 a year worse off.
A band 5 nurse will lose £1,159; a social care worker will have £1,108 less in the bank; and supermarket workers and teaching assistants will lose out on £1,040. When combined with the upcoming Universal Credit cut – which will see the £20 uplift introduced during the pandemic scrapped in October – many could be pushed further into working poverty and food bank reliance.
Bermondsey and Old Southwark MP Neil Coyle says the upcoming Universal Credit cut will affect 7,837 working people in his constituency alone, many of whom are receiving support to help with housing or childcare costs. Around 10,937 children in his constituency are in families dependent on the benefit.
He told the News that Department for Work and Pensions staff have admitted the cut has not been advertised directly to people in Southwark, an issue he raised with parliament’s work and pensions select committee last week – fearing that many families are simply unaware they will soon lose out. It is estimated that 900,000 more people across the country could soon be reliant on food banks due to the change.
This week, Labour leader Keir Starmer visited Bermondsey to meet people affected by the £20 cut to Universal Credit and National Insurance tax increase.
He was joined by Labour’s deputy leader Angela Rayner on Monday (September 13) and Coyle.
“The Conservatives’ plans to impose unfair taxes are an attack on working people and an attack on the key worker heroes who have got our country through the pandemic,” Starmer said.
“The government’s announcement on social care will not fix the crisis in social care, will not clear the backlog in our NHS and will not protect homeowners from having to sell their homes to pay for care.
“As usual with this prime minister, it is working people who are going to pay for the cost of his failure.
“Two and a half million working families will face a double whammy of a national insurance tax rise and a cut to Universal Credit.
“This is the same old Tories – putting the very wealthiest ahead of working people who have to pick up the bill.”