(3 years, 2 months ago)
Commons ChamberThis text is a record of ministerial contributions to a debate held as part of the Health and Social Care Levy Act 2021 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
I beg to move,
That provision may be made for, and in connection with, the following—
(a) the imposition of a tax on earnings and profits in respect of which national insurance contributions are payable, or would be payable if no restriction by reference to pensionable age were applicable, the proceeds of which are to be paid (together with any associated penalties or interest) to the Secretary of State towards the cost of health and social care but where expenses incurred in collecting the tax are to be deducted and paid instead into the Consolidated Fund, and
(b) increasing the rates of national insurance contributions for a temporary period ending when the tax becomes chargeable and applying the increases towards the cost of the National Health Service.
Supporting health and social care in the aftermath of a pandemic and amid the worst health crisis for 100 years, laying the long-term basis for social care for generations to come—there are few if any greater peacetime challenges for any Government, and that is why it is an honour to be opening this debate today.
As the House will know, yesterday the Prime Minister announced a plan to tackle the NHS backlog, put the adult social care system on a sustainable long-term footing and end the situation in which those who need help in their old age risk losing everything to pay for it. The Government’s plan will make a difference to the lives of millions of people across this country, and it will be funded with a record £36 billion investment into the NHS and social care.
What estimate has the Minister made of the impact of these measures on the ease or indeed the difficulty of securing continuing NHS care?
That is an extraordinarily wide-ranging question, and there are many ways in which impacts could be assessed. My right hon. Friend will be aware that the Government will be bringing forward a social care Bill, and there will be a Budget at which this measure, fiscal measures in general and the wider consideration of the fiscal position will be considered. In the documents published in relation to today’s debate, there is of course a sustainability analysis of the impact of the measure on different parts of the country, by background and socioeconomic income, and there is also a substantial plan published by the Government in relation to the Health and Care Bill.
If I may, I will just proceed a little bit further, and then I will be happy to give way.
In order to pay for a significant increase in spending in a responsible and fair way, the Government have announced a new 1.25% health and social care levy based on national insurance contributions. This Ways and Means motion enables the Government to introduce the levy and temporarily to increase national insurance contribution rates until it takes effect.
Will my right hon. Friend tell the House how much the 1.25% increase in national insurance will cost the NHS on top of its current payroll?
My hon. Friend will be aware that public sector bodies have been adjusted for in the numbers that have been published, and therefore the numbers that have been published are net of the impact on the public sector.
I understand that for a couple of years this tax revenue goes to the NHS, not to care, to get the waiting lists down. By how many will the waiting lists be reduced, and what is the plan for using this money to actually cut them?
Of course, it is impossible to say in advance what the impact will be, but I would direct my right hon. Friend to the remarks of the Institute for Fiscal Studies where it said that
“based on detailed analysis to be published later this week…this could be enough to meet the pandemic-related pressures on the NHS.”
I think that is a fairly—
No. I have already taken a few, and I will go on a bit further, if I may, and then I will take some more interventions. [Interruption.] Well, the hon. Gentleman has had a fairly substantial go at points of order already, and I welcome his later intervention.
The levy will apply UK-wide to taxpayers liable to class 1 employee and employer, class 1A, class 1B and class 4 self-employed NICs. However, it will not apply where taxpayers pay class 2 NICs or class 3 NICs. It will be introduced from April 2022, and then from April 2023 the levy will also apply to those working over the state pension age. As my hon. and right hon. Friends will understand, it takes time for Her Majesty’s Revenue and Customs to prepare its systems for such a major shift. That is why, in 2022-23, the levy will be delivered through a temporary increase in NICs rates of 1.25% for one year only. All revenues generated by this increase will be ring-fenced and paid to NHS England, NHS Scotland, NHS Wales and the equivalent in Northern Ireland.
Does the Minister not recognise the burden he is placing on small businesses, many of which the Government completely excluded and failed to support during the pandemic, in their now having to pay this extra levy, as opposed to making a fair taxation system that falls on those who can pay the most?
The hon. Lady will be aware that, because of the employment allowance, the bottom 40% of businesses will pay nothing and the next 40% will pay an average of £450. So this does not fall heavily on the bottom end of businesses, and of course it comes in a context in which the Government have provided over £400 billion of support to business and to the nation as a whole in the course of fighting the pandemic. In that sense it is, and it has been recognised to be by reputable independent commentators, a broad-based approach.
From April 2023, once HMRC systems have been updated, a formal legal surcharge of 1.25% will replace the temporary increase in NICs rates, which will return to their previous level. Again, this revenue will be ring-fenced in law for health and for social care only. As the Chancellor stated yesterday, this levy is no stealth tax. That is why the exact amount that each employee pays will also be visible as a separate line on their payslip. Finally, the levy will be administered by HMRC, and collected by the current reporting and collection procedures for NICs—pay-as-you-earn and income tax self-assessment.
I want to ask the Minister: how much money is actually going to get to local authorities to deliver social care at the frontline? Can I refer him to paragraph 36 of the Government’s document, which we got yesterday? It says that £5.4 billion in adult social care will be provided from this levy, but that will be spent on the reforms that are in the document. It also says that all the other pressures on social care that local authorities have now, demographic and otherwise, will be paid for from council tax and the social care precept, which is council tax by another name. So are we expecting the pressures on social care to be funded not from this document, but actually from further rises in council tax? Is that the honest situation?
I am grateful to the hon. Gentleman, and I am also very grateful to him for actually reading the document, which many of his colleagues may not have done, and he is absolutely right to draw attention to that section. What the levy does, of course, is to provide a very substantial form of funding for social care. The question of the capacity of local authorities, which is of course a matter of great interest to Government and an area that we have supported significantly in the last year or two, will be considered in the Budget in the normal course of things.
If I may, I will now set out why a levy based on national insurance is the best way to raise the funds needed for the Government’s plan for health and social care. The first reason is that there is already a clear precedent. Indeed, in 2003 the then Labour Government increased these same NICs rates by 1% specifically to put more funding into the NHS. Within the NICs system there is, as Members across the House will know, already a long-standing ring-fenced proportion of receipts directed to the NHS.
The second reason is that this is a fair method. Businesses will play their part. In fact, the largest 1% of businesses will contribute 70% of the revenue. However, existing NICs reliefs and allowances will also apply to the levy. That will mean, as I have said, that 40% of all businesses will not be affected due to the employment allowance. When it comes to individuals, those earning more will pay more. Conversely, at least 6.2 million people earning less than the NICs primary threshold will not pay the levy at all.
The third reason why a levy based on NICs is the right approach is that it has worked elsewhere. France, Germany and Japan have all increased social security contributions to fund social care provision. Finally, the question of how to fund health and social care is one that applies to a whole nation. NICs are set on a UK-wide basis, and the levy therefore provides a clear UK-wide solution.
Would the right hon. Gentleman put on the record for the House the consequentials for public bodies that are employers? They would normally be expected to pay this, but I understand there are some mitigations. Perhaps he could explain that, because in the time we have had we have not been able to get to the bottom of it.
The overall fiscal approach is set out in detail in the document that has already been referenced by the hon. Member for Sheffield South East (Mr Betts). We will be presenting a Bill in due course, which will have further explanatory notes and a tax information and impact note associated with it, and of course we have a Budget in which the wider fiscal position will become clear, so the House is not going to be short of information about how this will land.
Finally, if I may, I will just remind the House why this levy is so important. As the Prime Minister and the Chancellor set out yesterday, the levy will enable the Government to tackle the backlog in the NHS. It will provide a new, permanent way to pay for the Government’s reforms to social care, and it will allow the Government to fund our vision for the future of health and social care in this country over the longer term.
I thank the Minister for giving way. I have two points. He talks about the Government’s vision for health and social care, but with their obsession with outsourcing, that does not match the Scottish vision for health and social care. This is a devolved area. Why is the Minister not using tax, which the Scottish Government control? We have already been slagged for three years in this place for putting a penny on income tax bands to fund health and social care in Scotland. Why is he hitting Scottish taxpayers again, and taking power away from the Scottish Government?
Nothing could be further from the truth. All parts of the UK need a long-term solution to fund this health and social care position sustainably, including Scotland and the Scottish Government. Scotland’s own Audit Scotland has said that more money is needed in the Scottish social care system, and an independent review of adult social care said that more money needs to be provided. Of course, there is a Union dividend from that policy, in that Scotland, Wales and Northern Ireland will benefit by an average of 15% more than is generated by their residents. That is £300 million a year on average.
The Government have acknowledged that this policy involves a breach of the manifesto. They have done so directly, they have done so plainly, and they have done so honestly. But I would put it to the House that, in a deeper sense, this measure serves to redeem a promise and discharge an obligation. It is a profoundly Conservative thing to do, to provide for future generations without increasing our borrowing, without increasing spending, and in way that is sustainable and grips a nettle that for too many years has been ignored by the Labour party. With that in mind, I commend the motion to the House.
We should be looking at all forms of income, not just income from people who go out to work. A landlord who rents out a number of properties will pay nothing, whereas his tenants in work will. That is not fair, and that is why we cannot support the motion this evening. The Minister told us three important things today.
The hon. Lady has accused the Government, who have published a plan, of having no plan, when in fact the Labour party has absolutely nothing to offer on this topic. On the question she raises, the Resolution Foundation said in its report that the cap will offer support that will recognise higher care costs in different parts of the country, and the increased generosity of the means test will have relatively more impact in lower-wealth regions, in the north-east and other parts of the country.
With all respect to the Minister, I asked how he would suggest that one of his constituents with a house worth £186,000, and no other savings, will pay £86,000 for their care without selling their home. It is clear that he does not have an answer to that question, because there isn’t one.
The Minister has had a chance and he did not manage it. I will take an intervention from my hon. Friend.
My hon. Friend makes the point very well. People will still have to sell their homes to pay for care under these plans. There were three important points—
I have already taken an intervention from the Minister, and he did not answer the question. [Interruption.] Okay, I will take the intervention on the basis that he answers the question that I and my hon. Friend the Member for Rhondda (Chris Bryant) have asked: how on earth does someone pay £86,000 when their house is worth £98,000 or £186,000? Let’s have the answer.
I am surprised that the hon. Lady did not recognise the point about geographic impact that I made in my last intervention, but let me just point out that the Government have published a Build Back Better plan, which contains specific case studies of the impact of this measure. That is where she should look for an answer to her question.
The Minister is wasting the House’s time, because he is not answering the question.
There were three important points in the Minister’s opening speech. The first was that it is impossible to say what the impact of these proposals will be on waiting lists. The second was that spending for local authorities will be considered in the Budget. There is no detail at all about what money local authorities will get, and we are being asked to vote for a tax increase without a plan to fix social care. The third point the Minister made, in answer to the Chair of the Public Accounts Committee, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), was that councils will pay this levy as employers, so they will face increased costs but without any guarantee that they will get additional money to fund care. This is not a plan to fix social care.
There is no plan for care workers, who were underpaid and undervalued before the pandemic—before being sent out on to the frontline by this Government without the personal protective equipment that they needed. Some £8 billion was cut from social care by Tory Governments in the years before the pandemic, ignoring the rising demand, with care workers paid less than they can live on. This Government are not interested in bringing employers and unions together for a positive plan for the future of social care. They are not interested in making the care sector a career of choice, with decent pay and conditions and proper investment in skills.
We know that half a million care workers are needed by 2030. There were 100,000 vacancies in social care before the pandemic. That is only set to increase, with the GMB predicting 170,000 vacancies for care workers by the end of the year—one in 10 jobs unfilled. Labour’s plans will prioritise older and disabled people, shifting the focus of support towards preventive early help, and our guiding principle will be “home first”, because that is what the overwhelming majority of people want.
Let me first thank hon. and right hon. Members for their thoughtful and constructive contributions to today’s debate.
Yesterday, the Prime Minister set out a series of necessary steps to tackle the covid backlogs, reform adult social care and bring the health and social care system closer together on a long-term, sustainable footing. As the House well knows, the pandemic has put unprecedented pressure on the NHS. The number of patients waiting for elective surgery and routine treatment in England is now at a record high of 5.5 million. If left unchecked, that could reach 13 million, an issue of concern across the House. At the same time, this country is facing a long-standing challenge to the social care system. Typically, around one in seven must pay over £100,000 for care, with bills falling indiscriminately on some of the sickest and most vulnerable in society.
The Government’s response, the plan we have debated today, means an investment of £36 billion in the health and social care system over the next three years. Patients across the country will benefit from the biggest catch-up programme in the history of the NHS. The social care system will finally be reformed, ending unpredictable and catastrophic care costs faced by thousands and making the system fairer for all. I gently say to the shadow Chief Secretary to the Treasury, the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who said a moment ago that this is not the right time, that many times in this House people have highlighted the urgency of acting both on the covid backlog and on social care.
My right hon. Friend has helpfully said that one in seven—I believe that is what he said—people currently in the care system pay over £100,000. Could he just say in absolute numbers how many that is, in any given year or period he chooses? If he does not have the information with him tonight or cannot get it from the Box, can he write to me with that information and put a copy in the House of Commons Library before we have our next debate?
I am glad my right hon. Friend highlights that point. Let me address it in two ways, because it goes to the crux of his remarks in the debate. We have set out, as was referred to even by critics of the Government, the illustrative analysis of the impact of this from a distributional point of view, with lower-income households being the largest net beneficiaries. We have also said that we will say more on that, because it will evolve by 2023, when those of state age who are working come within scope. Obviously, the distributional analysis will change.
Let me take head on my right hon. Friend’s central concern, which was that his constituents in Rossendale and Darwen, because of lower housing costs, will be disproportionately impacted. First, if one looks at London, the Evening Standard, for example, is concerned that 14% will pay the lion’s share of the cost because that is where the highest concentration of higher tax payers are. For his constituents, one key aspect of the reform is that, through the cap, it ends the unpredictability of costs. If I look at the north-east of England, the Resolution Foundation found that only 29% of individuals aged over 70 have sufficient eligible assets that they will not receive any state support. The point is that the uplifting in the means test, which my right hon. Friend the Chancellor set out, again benefits those parts of the country he was championing.
I have just given way and addressed my right hon. Friend’s points head on. Let me, in turn, address head on the points raised by the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves).
In the shadow Chancellor’s speech, she said that she opposed the levy despite, as a number of Members pointed out, the previous Labour Government taking a similar approach in 2002-03, because she supports taxing wealth. The problem with that is that only a broad-based tax base, such as income tax, VAT or national insurance contributions, can raise the sums needed for such a significant investment. Again, that was a point made by critics of the Government, including my good friend, my hon. Friend the Member for Wycombe (Mr Baker). It could not be raised by taxes on wealth. Currently £6 billion is raised from inheritance tax, £8.7 billion from capital gains tax and £12.3 billion from property transaction tax. Indeed, that case was demolished by the Chair of the Treasury Committee, my right hon. Friend the Member for Central Devon (Mel Stride), as well as by my hon. Friends the Members for Dudley South (Mike Wood) and for Thirsk and Malton (Kevin Hollinrake), who highlighted that to raise the revenue required requires a broad-based approach.
On the subject of cases being demolished, one of the cases that the right hon. Gentleman’s colleagues have made great deal of play of today is that of the fictional Yusuf in the Government’s own document. According to the Government, Yusuf’s care home costs are £700 a week. They claim that under the current system they would have had to spend £293,000 before they reached the current cap. The Minister will be aware—I hope he can count—that in order to spend £293,000 at £700 a week—
What percentage of people going into a care home have any chance of still being alive in nine years’ time?
One of the features of the Dilnot proposals—Dilnot has been very frank about this—is that his costs ramp up over time. That is why the initial funding is £5.4 billion, but obviously, the social care element will increase. I will come to the case put forward by SNP Members, who seem bizarrely not to want the Union dividend that is offered and to not be seeking that additional funding. Let me finish on the Opposition amendment—
I will come to the points on devolution and happily give way at that stage, but let me just deal with the Opposition amendment, which requests a distributional impact assessment. As we have covered, that has been set out today. The Government have already published a document on the impact of our health and social care plan on households, looking at the impact of the new spending and the levy, with a full distributional analysis being published at the Budget and spending review.
As for the impact on businesses, businesses will play their part in funding this plan. However, existing national insurance contribution reliefs and allowances will also apply to the levy. This means that 40% of all businesses will not be affected due to the employment allowance, and it allows eligible employees to reduce their national insurance liability by up to £4,000. Again, that point was brought out by my right hon. Friend the Member for South West Wiltshire (Dr Murrison), who highlighted the impact on business and the fact that businesses, with 1% of the highest turnover, will cover 70% of the cost.
I think the right hon. Gentleman probably knows which point I am going to raise. I am very interested in the impact on local authorities. Out of the £36 billion that will be raised over three years, how much extra money will go to local authorities after the costs of the “cap and floor” system have been taken into account? How much extra money over three years will go to local authorities out of the £36 billion?
I listened very closely to the hon. Gentleman’s speech, because he is a very informed and knowledgeable commentator on these issues. He rightly pointed to paragraph 36, where we are being very clear about the role in terms of demographic and unit pressure. As he well knows, part of the discussion at a spending review is to look at local government pressures in the round. That is in the context that local authorities are getting an additional £2.2 billion of funding. I remind the House, in terms of the adult social care flexibility that was allowed for councils this year, that out of the 152 local authorities, less than two thirds actually used that flexibility. That is part of looking at these issues in context.
Let me come to the central point put forward by the Scottish National party, which was very well demolished by my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont). All parts of the United Kingdom need a long-term solution to fund health and social care. The Scottish Government’s independent review of adult social care recently noted—[Interruption.] I am quoting from their own review. I thought they would want to hear that. It stated that
“Scotland’s ageing demography means that more money will need to be spent on adult social care over the long term”—
and its recommendations to the Scottish Government are that this would
“require a long-term and substantial uplift in adult social care funding.”
In fact, in 2002, John Swinney said that a 1% increase was
“progressive taxation…required to invest in the health service in Scotland”.—[Scottish Parliament Official Report, 18 April 2002; c. 8005.]
Does the right hon. Gentleman accept that that was 18 years ago and that things have changed? Since that time, national insurance has not been reformed in any way to protect the poorest, as income tax has been.
Obviously, what SNP Members regard as progressive has changed. The point is that if they disagree with this, they can adjust their Barnett consequentials, spend that and reprioritise their spending accordingly. Indeed, likewise, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards)—I hold him in great affection and he speaks very powerfully in the Chamber—said that these are “English priorities”. Clearing the covid backlog and addressing the challenges of social care are not English priorities. They are United Kingdom priorities, they are this Government’s priorities, and they are the people’s priorities.
This levy will enable the biggest catch-up initiative in the history of the NHS, a comprehensive long-term solution to the social care challenge and a significant long-term investment that will directly improve people’s lives.
Those are things that I think my hon. Friend the Member for Wellingborough (Mr Bone) values, and I hope he will support them.
The Prime Minister said yesterday:
“You can’t fix the covid backlogs without giving the NHS the money it needs; you can’t fix the NHS without fixing social care; you can’t fix social care without removing the fear of losing everything to pay for social care”.—[Official Report, 7 September 2021; Vol. 700, c. 155.]
This plan addresses those problems. I commend it to the House.
(3 years, 2 months ago)
Commons ChamberThis text is a record of ministerial contributions to a debate held as part of the Health and Social Care Levy Act 2021 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
I beg to move, That the Bill be now read a Second time.
Last week the Prime Minister announced a plan to tackle the NHS backlog, put the adult social care system on a sustainable long-term footing, and end the situation in which those who need help in their old age risk losing everything to pay for it. The Government’s plan will make an extraordinary difference to the lives of millions of people across the country, and it will be funded with a record £36 billion investment in the NHS and social care. In order to pay for a significant increase in spending in a responsible and fair way, the Bill introduces a new 1.25% health and social care levy based on national insurance contributions.
We need to give credit where it is due, and the Government are absolutely right to try to grasp this nettle, but many of us are concerned about the haste with which it is being done. Does my right hon. Friend think it is a good idea to raise taxes on jobs ineffectively, and risk choking off an economic recovery before we have even got to know the details of the social care reforms?
My hon. Friend, and good friend, has raised two connected points. The first was dealt with earlier in points of order: it is the will of the House that decides the timings of debates, and the Chair addressed that point. As for the second, we discussed it at length during last week’s ways and means debate. We discussed the wider purpose in dealing with the consequences of covid and the backlog in care that needs to be tackled, but we also discussed grasping the nettle in relation to the long-term challenges surrounding social care—challenges that the House has debated repeatedly over many years.
The levy will apply UK-wide to taxpayers liable for class 1 employee and employer, class 1A, class 1B and class 4 self-employed national insurance contributions. However, it will not apply where taxpayers pay class 2 or class 3 NICs. It will be introduced in April 2022, and from April 2023 it will also apply to those working over the state pension age. As my right hon. and hon. Friends will understand, it takes time for Her Majesty’s Revenue and Customs to prepare its systems for such a major shift. That is why, as set out in clause 5, in 2022-23 the levy will be delivered through a temporary increase in NICs rates of 1.25% for one year only.
Does the Secretary of State agree that in principle hypothecation is to be avoided, and that what we should be doing is defining what spending is financially desirable and economically effective, and then asking a separate question: what is a socially equitable and effective tax regime? Those are two different issues, but we are smashing them together, and we do not even know what we are spending the money on. This is farcical, and it is being done in a mad rush.
There is a precedent in the form of what the hon. Gentleman’s party did in 2002-03. I do not think it is fair for him to say it is farcical to do something which was done by the Government whom he supported. He has opened up a much wider question about hypothecation, on which many a former Treasury official has commented, and I think that that is a separate debate; but there is a precedent for the use of national insurance in the way that my right hon. Friend the Chancellor has set out.
Let me stress that all revenues generated by this increase will be ring-fenced and paid not just to the NHS in England, but to NHS Scotland, NHS Wales, and the equivalent in Northern Ireland.
I have a great deal of sympathy with what my right hon. Friend is saying, and I think the Government deserve considerable credit for grasping this nettle at last, but may I ask for an assurance? When the charge has been introduced, will he ensure that every six months a Treasury Minister comes to the House and tells us what results are being achieved—what money has been raised through the levy and what results have been delivered; in other words, what additional treatment has been achieved—so that we can see and show our constituents why it was right to raise this levy and what they are getting for the money?
As a former Chief Whip, my right hon. Friend knows better than most that it is for the House to decide which Ministers come to the House and provide updates. Obviously, in respect of regular fiscal events and others—[Interruption.] It is. The right hon. Member for Leicester South (Jonathan Ashworth) chunters from a sedentary position, but through urgent questions and other such devices it is always for the House to decide which Ministers come here and, of course, there are regular events such as Treasury and other departmental questions. [Interruption.] He chunters but, as I have said, there are many procedures through which updates—[Interruption.] The procedures to which I referred.
Under clause 2, this revenue will be ring-fenced for health and for social care—
I will make a little progress. I have taken a number of interventions, including one from my right hon. Friend.
Existing NICs reliefs and allowances will also apply to the levy. That will mean that 40% of all businesses will not be affected owing to the employment allowance. When it comes to individuals, those earning more will pay more. Indeed, the top 14 per cent. of taxpayers will pay about half the revenues. Conversely, at least 6.2 million people earning less than the NICs primary threshold will not pay the levy at all.
I am sure that the hon. Lady rises to welcome the progressive nature of that measure.
Does the Secretary of State accept that, if 40% of businesses or employers are not affected, the other 60% therefore will be? What assessment has the Treasury made of the number of jobs that employers will not create because of, apart from anything else, the introduction of this measure at a time when the recovery from covid is fragile?
It is not just that the first 40% will not pay anything, as my right hon. Friend the Chancellor mentioned. The next 40% will pay less than 1% of their wage bill, and indeed 70% of the employer contribution comes from just 1% of business. To some extent, the hon. Lady’s point was also picked up by the Monetary Policy Committee in its evidence to the Treasury Committee, when it said, “You should not ignore one half of the policy announcement.” Of course, one needs to look at the spending implications of the measures, not just—
In my experience of being a Minister at the Department of Health—with my right hon. Friend, indeed—Treasury Ministers do not like to spend billions of pounds without knowing exactly what they are getting for their money, and rightly so: it is our constituents’ money. We know that there is a very carefully worked out plan that the Secretary of State for Health and Social Care has agreed with the NHS for the catch-up programme. Will the Minister help us to see that published, so that we as representatives can hold the NHS to account for the money that this levy is raising and our constituents are therefore spending?
I could probably go slightly further—Chief Secretaries do not like to spend, not necessarily just on any particular area of Government policy—but my hon. Friend is absolutely right about the importance of delivery and how the money is spent, particularly the £8 billion allocated to electives catch-up. Just yesterday I was at a meeting in No. 10 with the leadership of the NHS, discussing that issue with the chief executive of NHS England and other senior health leaders. I know that it is an issue of concern to a number of Members, but ultimately it is an issue of concern throughout the House, because through our constituency surgeries we see the consequence of the backlog in terms of electives. That is, I think, an area of common ground.
Will the Minister give way?
The Minister has made the point that we see the impact in our constituencies. Yes, we do, but we are also seeing the impact in our constituencies of the pandemic on business. What would the Minister say to the Federation of Small Businesses, which, notwithstanding what he has just said, believes that
“Business owners who have done all they can to retain and support their staff during the pandemic are now being punished”?
The FSB sees this as a jobs tax, and we will see that impact in our constituencies as well.
First, in order to meet the quantum of spend, one needs a broad-based tax. That is a point that my hon. Friend the Member for Wycombe (Mr Baker), who is not in his place, raised in the debate last week. Secondly, I would point to the more than £400 billion—[Interruption.] I do not know why SNP Members are laughing at £400 billion of support. I do not think that this is a point of difference. I think we can all agree across the House that there has been huge fiscal support across the UK through the broad shoulders of the United Kingdom to support business, at a cost of £400 billion to businesses, public services and individuals, and that has a consequence. Most of the business leaders I speak to recognise that, and recognise that the backlog in the NHS needs to be dealt with. I would add the further point that those businesses benefit from the NHS clearing its backlog because it is members of staff in those businesses that are affected.
What analysis has been undertaken of the long-term sustainability of this policy, which targets working-age people at a time of an ageing population? There will be 10 million extra pensioners within 20 years, which means that the pool of people who are paying in is shrinking in relative terms while demand is increasing.
Again, this is why, as is standard practice, my right hon. Friend the Financial Secretary to the Treasury has published the tax information and impact note on the tax change. Of course, that will be dynamic because it will interact with the fiscal forecast that the Office for Budget Responsibility will set out alongside the Budget on 27 October. So that is dealt with in the normal way for measures such as this—
I want to make some progress, and I have already given way once to the hon. Member for Swansea West (Geraint Davies).
Let me remind the House why this levy is necessary. As the Prime Minister and the Chancellor have said, the levy will enable the Government to provide additional funding to the NHS so that it can recover from the pandemic. Senior NHS leaders have made it clear that, without additional financial support, we will not properly be able to address the significant backlog in the national health service. However, it is going to take time to get everyone the care they need. In addition, our social care plan will create a dramatically expanded safety net for people in their later life. This means that, instead of individuals having to bear the financial risk of catastrophic care costs themselves, we as a country are deciding to share more of that risk collectively.
Could the right hon. Gentleman explain to people up and down the country who are either in receipt of care now or will need to start care between now and October 2023 and are facing catastrophic care costs what they are meant to do? Does he accept that there will be a massive cliff edge? Lots of people will try to avoid coming forward for care in the months before October 2023, and there will then be a massive surge. How do the Government plan to deal with that?
In a number of ways. First, this fiscal support is not in isolation. There is £33.9 billion of additional support going into the core NHS budget over the five years of the long-term plan. That has had a significant impact. On top of that, significant covid support has gone into the NHS. One of the points that came out of the debate on the ways and means last Wednesday was the interrelated nature of the impact on the NHS and on social care. That is why it is right that we are gripping this issue, but it is alongside the wider financial support that the Treasury has offered.
Given that we need to progress on to Committee, I shall just point out that this is a permanent new role for the Government and a structural increase in the size of the British state. We therefore need a permanent new way to pay for it. The only alternative would be to borrow indefinitely, but that would clearly be the wrong course of action when our national debt is already at the highest it has been in peacetime. Borrowing even more today would just mean higher taxes in the future.
With money tight, did the Treasury support the appointment of, I think, 43 new executives on £270,000 a year to check where all this money is going?
I think one needs to see whether these are roles that are driving efficiency and creating savings elsewhere, or whether they are viewed in isolation. That is why one needs to understand the workforce as a whole, where there are overlaps within the NHS but, above all, how we deliver reform, which is something I know that the Secretary of State for Health and Social Care is passionately committed to doing. That relates to the point that was rightly raised by my hon. Friend the Member for Winchester (Steve Brine) on the delivery of reform in order to maximise the value for money of the spend that the levy will unlock.
Finally, we need to fund our vision for the future of health and social care in this country over the longer term. As the Prime Minister said, with proper funding, we can not only tackle the NHS backlog and expand the social care safety net but afford the nurses’ pay rise, invest in the best equipment and prepare for the next pandemic. We can provide the largest investment ever to upskill social care workers and build the modern, more efficient health service the British public deserve.
It seems to me that we are spending this money twice, so can the Minister tell the House specifically how much will go into the NHS from this increase and how much will go into social care? What I am hearing from him is that we are going to deal with the backlog, which will take us back to pre-pandemic levels. That will leave us with a 2 million waiting list, so can he tell us specifically how much is going into the NHS and how much is going into social care?
Of the £36 billion, £5.4 billion is going to adult social care, with the rest going into the NHS or through Barnett. That is over three years.
Does my right hon. Friend think that the Government could consider different bands for frontline staff in the NHS and management staff in the NHS, to get away from the concern that so many of my constituents have that any pay rises in the NHS will be taken up by managers over frontline operators?
In the public sector pay agreement that we reached, we accepted the recommendations of the independent pay review body. That is why we decided on 3% and why the NHS was treated differently from other areas of the public sector such as the police and teachers. This recognised the importance of those frontline workers and it was why those under the threshold of £24,000 were carved out. This recognises the point that my right hon. Friend has raised.
In conclusion, this levy will enable the Government to tackle the backlog in the NHS. It will provide a new permanent way to pay for the Government’s reforms to social care and it will allow the Government to fund our vision for the future of health and social care in this country over the long term. I commend the Bill to the House.
Before I call the shadow Minister, I should say that there will be a six-minute limit on Back-Bench speeches to start with. If anybody wishes to speak, they should catch my eye, and to do that it is important to keep standing. If colleagues have not put in to speak but wish to do so, it would be helpful to let me know. They will have to have been here from the beginning of the debate, and they will be expected to be here for the wind-ups, which will start at approximately 4.45. Bearing all that in mind, I now call the shadow Minister, James Murray.
I thank everyone who has taken part in what has been, with one or two exceptions, a generally constructive debate. I will start with the contribution of the hon. Member for Erith and Thamesmead (Abena Oppong-Asare). She said rightly that politics is about choices, but what choice has Labour given the people of this country? Has it given the people of this country a healthcare plan or a social care plan? Has it given the people of this country any indication of what taxes it would raise? Again and again, the Opposition have been asked by Members not just on the Government Benches, but elsewhere, what taxes they would raise and what their plan is, and there is no plan.
There have been 27 speeches, so, if I may, I will continue for a while. I may take an intervention later if we have made a bit more progress.
I feel particularly badly for the hon. Member for Erith and Thamesmead because, when the hon. Member for Hornsey and Wood Green (Catherine West) was asked what Labour’s plan was, she said that her Front-Bench colleagues would address that in their remarks. We waited with bated breath for the moment when they would address the question of what the plan was or what taxes would fund it. I can tell you, Mr Deputy Speaker, that it will need a lot more than £12 billion of health and social care funding to repair the damage from that hospital pass from the hon. Member for Hornsey and Wood Green.
I am grateful to the Minister for giving way, as he mentioned me. The UK economy has seen enormous asset price bubbles, yet not much appears to be getting back from those who have made quite a lot of money over the years through real estate. Why is he taking more money from working people instead of those who have gained enormous amounts—millions—from the asset bubble?
I am desperately sad, because I thought the hon. Lady was going to answer my questions about Labour’s plan or the taxation for it. Of course, we would expect people earning that income to pay property and income taxes in the proper way, and, if they are receiving dividends, their tax will go up as a result of the changes that we have made. [Interruption.] I am asked on what basis I say that. It is on the basis of a distribution analysis of the overall package of measures published by the Treasury in the last week, which is available for all Members to read and consult. If they do, they will see that this is a very redistributive package, with the highest-income 20% of households contributing 40 times that of the poorest 20% of households. It is a genuinely progressive policy, and the distribution analysis makes that clear.
I do not think that the Minister will mind me saying that he has served in the House for slightly longer than me. In his time, has he ever known a situation in which the Labour party—a supposed party of the NHS—has voted against billions of pounds of investment in the NHS?
It is a desperate shame that the Labour party has decided to take this party political position, because this area above all is one where we would expect it to back its own policy priorities. I remind the House that these measures are more progressive than the national insurance contribution rise of 2003 for which Labour Members enthusiastically voted, yet they are not supporting them. I find that extraordinary—[Interruption.] I am asked where my plan is. It is written down, and it is called “Build Back Better: Our Plan for Health and Social Care” That is a plan. The void that exists on the Opposition side is not just a void of a plan but a void of a tax package to pay for it.
Colleagues throughout the House have made the right and proper suggestion and implored the Government to look carefully at how the funds that we are raising can be appropriately spent. We must be careful about that. No Conservative wants to raise taxes, and indeed no Conservative would like to waste money. I want hon. Members to understand that Ministers very much take that on board. As hon. Members will know, we have a health and social care plan coming forward in a White Paper, and legislation is in place to put it on the statute book. That is the position.
My hon. Friend the Member for North Norfolk (Duncan Baker) and the hon. Member for Liverpool, Riverside (Kim Johnson) rightly made a point about younger people and support for care workers. Of course, we have not just the already published plan for jobs but £500 million of new money pledged to support social care workers, including through new qualifications, progression, and wellbeing and mental health support. That is an important part of what we are doing.
There was one Opposition Member who had genuine ideas for taxation that would support social care: the right hon. Member for Barking (Dame Margaret Hodge). She presented a whole raft of ideas. I do not accept the ideas she put forward, for different reasons, and I think the proposal that the Government have put forward is superior as a single, broad-based package of measures that has this progressive, distributional effect, but she came forward with ideas. What a void, what an emptiness, what a vacuity sat around her from the Labour Front Bench and from the rest of her party. I congratulate her on at least trying to answer the question put by the hon. Member for Erith and Thamesmead that politics involves choices; and what was the choice? The right hon. Member for Barking gave us one.
In doing so, however, I think the right hon. Lady erred. There has been some discussion about the tax information and impact note that the Treasury put out last week. Let us be perfectly clear: that is a technical document that relates only to this levy. It does not relate to the overall effect of the package of measures that it funds; macroeconomically, we expect that overall effect to be broadly economically neutral. That is the picture we are presenting, so just to look at the tax side, as the right hon. Lady did, is I am afraid to miss half the point of it. The point was made very well by Ben Broadbent, a member of the Monetary Policy Committee of the Bank of England. He said that
“one should not ignore one half of that policy announcement as far as the effects on the economy concerned”,
and he was absolutely right about that. So what we have is a balanced policy: we have a health and social care plan with a funding package that the House is considering at the moment.
Let me talk a little more about colleagues. I very much support the comments of my right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning) about the concern that other Members across this House have about the increase in pay at hospital trusts and in some parts of the NHS. That is a matter of concern, and we have to be absolutely clear that that money is being properly spent in the NHS and across hospital trusts. It is a very strong concern of my right hon. Friend the Chief Secretary, because he—like us, like me—is concerned to support not just our NHS, but the taxpayer in making sure that that money is properly spent.
I very much supported the points made by my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) when he celebrated the adult social care workforce. He was absolutely right to do that, and I hope he will be pleased at the £500 million that we have mentioned in that regard.
May I remind the House that, in grasping this nettle, the Government have not just moved forward on an issue that has been outstanding before this House for many years, but have shown how inadequate the Labour party response was to its own royal commission of 1999, from which, as we can see, virtually no social care—no enduring social care—package followed? If you do not like that, Mr Deputy Speaker, let me direct you to the Wanless report of 2006, on the basis of which no sustainable social care package was developed. That situation is changing now. This Government are putting that sustainable social care funding in place. We are doing it with a levy that tracks many other countries that have social care levies in place. This is a progressive, long-term way to address a problem that has remained in front of us, but unaddressed, for far too long, and I commend this measure to the House.
Question put, That the amendment be made.
(3 years, 2 months ago)
Commons ChamberThis text is a record of ministerial contributions to a debate held as part of the Health and Social Care Levy Act 2021 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
It is a great pleasure to be here today to explain the clauses in this Bill.
The Social Security Contributions and Benefits Act 1992 sets out the earnings and profits on which employees, employers and the self-employed are liable to pay national insurance contributions. Clause 1 of the Bill introduces a new tax, to be known as the health and social care levy, which will be charged on the same basis as national insurance contributions. The levy will be set at 1.25%, and will affect earnings from 6 April 2023 onwards. When individuals or employers are liable for a qualifying national insurance contribution, they will also be liable for the levy. The levy will be payable on the earnings and profits on which those contributions are payable. The qualifying national insurance contributions in question are primary class 1 NICs that employees pay on their earnings, secondary class 1 NICs that employers pay on the earnings of their employees, class 1A and class B NICs that employers pay on benefits in kind received by their employees, and class 4 NICs paid by the self-employed.
This new levy has been introduced to raise funds for health and social care, so it is only right that individuals of all ages who are able to pay should do so. Therefore, individuals over state pension age who would be liable for those contributions were they not exempt will be liable for this levy.
If we are talking about an insurance system, can the Government explain why they have ruled out state-sponsored insurance? I can understand why they cannot rely entirely on private insurance—the risk is too great—but Dilnot originally came up with the idea that people could take out insurance when they retired which would be a charge on their house, and they would have to pay it back when they died on the basis of the value of their house. I am not asking the Government to accept these ideas now; I am simply asking whether they have an open mind and are prepared to look at them. This is a complicated matter, and we want to have a real insurance system.
In the collective sense, this is a state insurance system, because it is making long-term provision for catastrophic outcomes in people’s health and social care, but the point that my right hon. Friend has made is an acute one. He will be aware that both the King’s Fund and the House of Lords Economic Affairs Committee have looked at private insurance models and concluded that they have severe limitations that would not make them appropriate. Indeed, no country in the world has a purely private insurance model. It has certainly been contemplated by Professor Dilnot, and it is compatible with the thrust of this legislation, that there should then arise a private insurance market, now that some of these catastrophic risks have been removed from the calculus that individuals have to make about their own social care. I hope that that addresses my right hon. Friend’s point.
As I was saying, individuals over state pension age who would be liable for those contributions were they not exempt will be liable for this levy. That means that pensioners in work will now contribute 1.25% of their “NIC-able” earnings, or profit, to health and social care in the same way as working-age employees and self-employed individuals.
Clause 3 discusses in more detail how NICs legislation applies to the levy. However, clause 1 also ensures that when an employer benefits from a zero rate of secondary class 1 NICs, such as employers of people under 21, of apprentices who are under 25, of veterans or of employees in freeports, those earnings that are subject to the zero rate will not be liable for the levy. That will ensure that businesses continue to invest in young people developing strong skill sets, and in those who have served this country.
As I understand it, it is the Government’s wish that the social care levy should appear as a separately identified line item, with that phrasing, on a payslip. Could it also be clear on a payslip that it would represent only a small fraction of social care costs and a tiny fraction of health costs? Otherwise, it could be very misleading.
That is a helpful suggestion. I do not think there will be any ambiguity in the language on the slip, but of course it might not be clear that it is not the totality of the funding that goes through Government. If I may, I will take what my right hon. Friend has said as a suggestion and refer it to colleagues.
I would like to ask the Minister, as he has such responsibilities across the board, whether he has contemplated the question of public waste in the context of, for example, HS2? If we were to cut that back and to cut back waste generally throughout Government, would that not send an enormously powerful message to the British people that we are not only concentrating on this aspect of public expenditure but balancing it off by making real savings in other areas, given that the Treasury or its economic advisers have said that they have put phase 2a of the HS2 legislation on red watch because it is so impossible to achieve its objectives?
My hon. Friend has successfully dragooned a topic that has nothing to do with national insurance contributions or the levy into the debate, but let me reassure him that the Treasury seeks to exercise a hawk-like vigilance over all public spending. I do not think it would be appropriate to think of the response to the pandemic of the past two years as characteristic of the Treasury’s overall largesse, and we look very closely at the spending on HS2, which is the specific responsibility of my right hon. Friend the Chief Secretary to the Treasury and one that I know he takes with great seriousness.
The fact that the social care levy will be introduced in 2023 and not 2022, and that in the interim we will have to rely on national insurance, suggests that creating it will involve quite a lot of work and expense. How much is it going to cost to introduce the levy, beyond national insurance? Based on that, we will need to make an assessment as to whether it is worth while putting the 1.25% levy on people who are past state retirement age. If it is costly, we should not do it and simply rely on national insurance contributions. Allied to that, how much does my right hon. Friend think the 1.25% levy is going to raise from people who are beyond state retirement age?
That was a series of questions. The payslips that people are given will be generated by their own companies in the large part, and it is therefore important to think not only about the changes that HMRC will have to make but about the changes to be made by companies in order to reflect the amendment to payslips. In the case of HMRC, the Government have clarified in a letter to the Treasury Committee that, although it is very early days, HMRC provisionally estimates the operational costs of implementing the levy at between £50 million and £60 million, which is not nothing but it is not substantial in the context of the overall amount to be raised. I think the final part of my right hon. Friend’s question related to the amount that would be attributed to the over-65s. One would expect that to be relatively modest, because the number of qualifying people will not be enormous and because they generally have a high propensity to manage their work-life balance, meaning that there might be a dynamic effect from the levy. I am not aware that we have put that number into the public domain, but if we have it, I will see if we can publish it, probably at a future fiscal event—at the Budget or thereafter.
Order. Just before Dr Murrison makes a further intervention, can I ask the Minister please to face the microphone? Otherwise, Members will not be able to hear his responses; I have found it difficult to hear him.
Just to clarify my thinking on this matter, is that £50 million to £60 million a one-off or a recurring feature?
I think it is the set-up cost, although it may be incurred over more than one year. As I say, it is a very preliminary number that we have tried to get for the purposes of responding to the Treasury Committee’s inquiry.
My right hon. Friend talks about the advantages of having clarity on payslips about what people are paying for with the health and social care levy. Has he thought about combining the existing national insurance contributions that are allocated directly to the NHS and do not go into the National Insurance Fund? They are around £26 billion each year, which would effectively treble the amount of money in the levy. That would make it much clearer that people are paying all of it towards the health system, rather than having two different taxes doing exactly the same thing in slightly different ways.
My hon. Friend rightly points out that an element of NICs is already hypothecated, which is sometimes forgotten by people who are concerned about the hypothecation in the levy. I will take his remarks as a suggestion and reflect on them further. I recognise his expertise in this area, so I am grateful for the intervention.
Serendipitously, I will now address my hon. Friend’s amendment. This amendment asks that HMRC should publish a forecast of the estimated costs of collecting the levy. The published tax information impact note sets out clearly that the operational costs of the levy are being quantified. I have given a preliminary indication, but we will publish the final estimates before the levy comes into effect in April 2022. This amendment is therefore not necessary and I would ask him to consider not pressing it to a vote.
Building on the point made by my right hon. Friend the Member for Wokingham (John Redwood), is not one of the advantages of having a separate health and social care levy that, as people’s representatives, we can explain more clearly that if we want to put more money into the system, it has to be paid for? Will that advantage not ultimately help connect people to where their money goes and, therefore, enrich the debate?
I think it will, which is why the Government have decided to make this rather important change. It may well be that this is not the end of the story, and in due course the desire for clarity about how money is spent, which is expressed elsewhere in the tax system, might manifest itself in other ways. I do not want to speculate on that, but my right hon. Friend has outlined the importance of accountability, clarity and perspicuity in how money is spent.
Would it not be even simpler and more transparent if we had a social care levy standing on its own? Is it not the case that the Government do not want to have a social care levy on its own because they know that, if there were transparency, it would be obvious that we were reneging on our manifesto commitment of two years ago?
I do not think that is true at all. The reason for putting it on the payslip is so that taxpayers can see that this new tax is clearly represented. If they need reassurance that the support for social care, in their own life and in the life of their family and community, will be long standing and enduring, they need only look at their payslip.
If it is about social care, why do we not have an exclusive levy relating to social care? Would that not be much clearer and more transparent?
My hon. Friend invites us to think of social care as a completely separate thing, but of course there is a tremendous overlap between social care and some aspects of health. It is important to make sure that the system, which I think all hon. Members realise is too disjointed, is more joined up. This treatment therefore appears to be more appropriate to an area where we want to see more integration.
The hon. Gentleman has not featured in the debate so far, so I will make a bit more progress before happily taking his intervention.
Amendment 7, tabled by my hon. Friend the Member for Yeovil (Mr Fysh), seeks to ensure that proceeds from the levy can be used in any tax year. As the Committee will be aware, the levy is designed to mirror the approach of the national insurance system, which has always operated on a pay-as-you-go basis. Indeed, that has been the case since the NHS and the National Insurance Fund were established in 1948. This means that national insurance contributions collected in one year are used to pay for the NHS and contributory benefits paid out in the same year. The pay-as-you-go basis provides a clear precedent for how the levy should operate and that also ensures simplicity and consistency across the NICs system. So I hope that my hon. Friend will not press his amendment, for the reasons I have outlined.
On the point made by the hon. Member for Christchurch (Sir Christopher Chope), one reason the Government have used the term “health and social care” is that they have established a principle that people pay at the point of delivery. As we see health and social care begin to integrate, the fear for many Labour Members is that this is a Trojan horse for introducing those payments for healthcare—for the NHS. One of my fears when the Prime Minister spoke of this delivering “profoundly Conservative” outcomes was just that danger.
It is helpful to have a diagnosis of why Labour Members might be opposed to or worried by this, but the fear is entirely without foundation. There is no suggestion that the Government wish to create a system that is anything other than free at the point of delivery, and that is the basis on which the Government have always proceeded and proceed now. We are trying to put a longer-term arrangement in place for social care that allows us to bring the same kind of clarity to it that people have enjoyed for many years with the NHS.
If the Government believe in a social care system that is free at the point of use, why are they not delivering a social care system like that, one like the NHS, which is universal and available to everyone?
I do not know whether the hon. Lady heard, but I was talking about the NHS and that has been a founding principle of the NHS, one the Conservative party have always adhered to, and rightly so. What we are doing with the levy is funding an expansion and a development of an existing set of arrangements, and, as I have discussed in relation to the question from my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), the potential to expand that through the use of other mechanisms of support, now that these catastrophic risks have been removed, or will be removed, from people’s lives.
Let me turn to the amendments tabled by the Scottish National party and Plaid Cymru which look to require a joint agreement between the Treasury and the Governments of Scotland, Wales and Northern Ireland as to how the levy proceeds are to be shared between the four parts of the UK, and between healthcare and social care. As for how the levy revenue will be split between the four parts of the UK, this legislation mirrors existing legislation on how NHS allocation is divided between England, Scotland, Wales and Northern Ireland. It is right and appropriate that we should follow that established precedent. The Government will work closely with the devolved Administrations on the implementation of the levy, including on the process for allocating revenues across the UK and on the split between health and social care from April 2023 onwards. It is also worth bearing in mind that the devolved Administrations’ overall funding will continue to be determined by the Barnett formula, so that this process will just determine the element provided by the levy. I hope that the Members concerned will not press their amendments, for the reasons I have outlined.
I do not know whether the Minister has read the note from the Hansard Society on this, but it is concerned by some of the implications for the devolution settlement. It says:
“There is also no requirement in the Bill for the Treasury or the Health Secretary to consult the devolved administrations about any aspect of the process.”
Is that not a cause for concern?
The Treasury already consults the devolved Administrations very closely on many aspects of tax policy and there is no reason to think, and the Bill does not suggest, that there should be any other reason for handling this. On the contrary, following an existing hypothecation gives direct support to devolved Administrations that they will be able to receive the Union dividend, which is generated and delivered by this policy.
Clause 2 creates a legally binding obligation to use the funds raised by this levy for the purposes of health and social care, and sets out that HMRC will direct funds to the Secretary of State to be used for the cost of health and social care in England, Wales, Scotland and Northern Ireland. The funds from the levy will be shared between healthcare and social care, and will be shared between each nation in a proportion determined by the Treasury. The Treasury has used the long-standing Barnett formula to fund devolved Administrations and will continue to do so for the proceeds of this measure. Clause 2 goes further and ensures that any interest or penalties that can be attributed to the levy will also be used to fund health and social care. However, any expenses incurred by HMRC in collecting the levy will be deducted from the proceeds, which ensures that HMRC has the ability to collect and police this levy properly. I therefore ask Members to allow clause 2 to stand part of the Bill.
On clause 2, in 2014 we passed the Care Act and accepted the Dilnot proposals; slightly less than two years later, we canned the central part of the Dilnot proposals, in that it was decided that local government should in fact have the social care uplift, which had been anticipated in 2014. What certainty do we have that the measures we are passing today will not be dealt with in a similar way if, in two or three years’ time, we find that the pressures on local government are so acute, which they may well be, that we have to can some of the measures we discussed earlier?
I thank my right hon. Friend for his question. I think the point is perfectly clear: this levy is intended to be and will be a long-term, permanent funding arrangement to support health and social care. The plan includes a component that is designed to support local government in the delivery of care services without distorting markets that are already in existence. There is no reason to think, and we do not anticipate, that there will be specific issues that cannot be addressed at the time. The commitment to provide a longer-term funding settlement that can be reviewed and considered by individuals when they pay their national insurance contributions, and to do so in a way that gives them comfort that that same settlement will be in place, in a way similar to the state pension system, so that they can plan against it, is manifest. The Government have made that clear.
Clause 3 specifies that any provisions that apply to a qualifying national insurance contribution are to apply to equivalent payments in respect of the health and social care levy. It also sets out the limitations of such provisions applying to the levy.
Clause 4 provides for regulations for the purposes of the health and social care levy to be made under the Bill and specifies the parliamentary procedure that will apply to those regulations.
Clause 5 sets out the transitional arrangements for the measure and specifies that they will apply only for the 2022-23 tax year. Its effect will be to increase temporarily the rates of classes 1, 1A, 1B and 4 NICs by 1.25% for one year. There will be a corresponding temporary increase in the amount of contributions allocated to the NHS by the same amount.
Clause 6 defines various terms used in the Bill. Clause 7 specifies the short title of the Act as the Health and Social Care Levy Act 2021 and states that the levy is payable by or in relation to employees of the Crown. I commend all those clauses to the House.
Let me turn to new clauses 1 and 2, tabled by the SNP, and clauses 3 to 5, tabled by Labour. These new clauses ask the Government to review and report on the impact of the revenue effects of the levy, its impact on business and its impact on equality. I wish to explain why they are unnecessary.
The Government have already provided a number of assessments of the levy’s impact, including a distributional analysis of the impact of the combined tax and spending announcements that shows that lower-income households will be large net beneficiaries from the package, with the poorest households gaining most as a proportion of income. It also shows that the 20% of highest-income households will contribute more than 40 times the contribution of the 20% of lowest-income households.
There is a further assessment in a technical annex in the Government’s plan for health and social care. It sets out the impact on the Exchequer, individuals and businesses and shows that 70% of the money raised from businesses will come from the largest 1% of businesses, while 40% of all businesses will pay nothing extra.
The tax information impact note is a third form of assessment. It sets out the equality impact of the levy specifically rather than of the overall package of measures.
As well as on businesses, the levy will have a large effect on the bills of public services. For instance, West Yorkshire Police is looking at having to pay an extra £3 million of national insurance, and for Leeds City Council the amount for directly employed services is also in the region of £3 million. Somewhat ironically, many of the social care services that the council uses are outsourced, so the NICs will push up the cost of those services. What assessment has the Minister made of the effect of the levy on local government and the police?
The plan is clear that, to the extent that national insurance contributions are incurred by public bodies, they will be met. The funding is set up on that basis. In respect of local government, extra pressures other than those already contemplated are matters for discussion in the spending review. That is the normal fiscal procedure and the one the Government are following.
I turn now to address the Opposition’s new clauses 6 and 7 on reporting the levy expenditure shares and the revenue derived from those in the social care sector. First, on the share of levy spent on health and social care, the Government already routinely publish data on departmental spending throughout the year, including at main and supplementary estimates, through public expenditure, statistical analyses and in departmental annual reports and accounts as well as data on the revenue raised from individual taxes.
At present, this reporting shows, for example, exactly how much revenue NHS England receives from national insurance contributions. In future, this will show the contribution that this levy makes to the budgets of the Department of Health and Social Care and the Ministry of Housing, Communities and Local Government. There is no need for additional reporting in that context as all the relevant information will readily be publicly available. The Government have already published the amounts that will go to the NHS and to adult social care over the next three years as a result of this levy and will confirm final allocations at the spending review.
Finally, on the levy revenue derived from those in the social care sector, existing data sources do not include or reliably collect data on employment by sector. It is not known which sector an individual works in, only their income types and amounts. I hope that, given these considerations, Opposition Members will not press their new clauses for the reasons that I have outlined.
Let me turn to new clause 10 tabled by my hon. Friend the Member for Amber Valley (Nigel Mills). This would require the Office for Tax Simplification to publish an assessment of the merits of the levy. As outlined in the Finance Act 2016, the statutory role of the OTS is to advise on the simplification of the tax system. To assess fully the advantages and disadvantages of introducing the health and social care levy would require the OTS to consider and comment on choices with far broader policy considerations, including on health and social care, which sit well beyond its remit and expertise.
The OTS functions as an adviser to the Chancellor rather to Parliament and it is for the Chancellor to commission work for the OTS or for the OTS to advise the Chancellor on its own initiative as it sees appropriate. It is not the role of Parliament to commission work from the OTS, though I have no doubt that the Treasury will have taken on board this new clause, and I thank my hon. Friend for tabling it.
The published tax information and impact notes set out clearly that the operational costs for the levy are being quantified and the Government will publish these estimates before the measure comes into effect in April 2022.
Does my right hon. Friend have any rough estimate of the cost to business of having to comply with the rules of paying, in effect, a third payroll tax? Does he have any idea of the costs of changing the software to include that levy and of redesigning payslips? All those costs will have to be borne. Does he have any estimate for us before we decide whether we want a new tax or just to increase national insurance as we are doing for the first year?
It is true that, just in relation to the levy, business will bear some cost and the existing tax information and impact notes outline that there will be costs to be borne, as one would expect with any tax, let alone a broad-based tax of this kind. The package goes well beyond this, and businesses will be large beneficiaries in many ways from aspects of the package because they will benefit from having a healthier and more secure workforce than they would otherwise have. How one measures that I am not entirely clear, but I take the point that my hon. Friend makes and will, of course, refer it to colleagues. Having said that, I hope that he will not press his new clause for the reasons that I have outlined.
I am afraid that I must correct myself. It is actually £40 million to £50 million, rather than £50 million to £60 million. I was relying on an imperfect memory.
Perhaps the Minister was building in some optimism bias, as the Treasury normally does to other people’s forecasts, and going for £50 million to £60 million to make sure. I do not know whether that is the cost of building the systems to enable the returns to be made, or to enable the systems to collect or chase the money, or whether there is going to be some ongoing annual cost; I assume that there will be some ongoing annual cost in trying to chase compliance too. However, we do not have an estimate for how much we are going to be imposing on business to pay this tax.
I imagine that this will be a separate tax that is not collected in the same way—the same box—as national insurance. I assume that there will have to be different parts of the payroll returning different calculations, which will require every software provider to change all their software coding to cope with it and to add in the new amount that is being paid by people over retirement age who do not normally pay national insurance. All that will cost time and money and need testing and compliance, and then we will have to check whether employers are following it and chase them for the money.
I suspect that there will be quite a large up-front cost for all that work to be done, and then a reasonable annual cost to ensure compliance, so there is a first-order question whether we are raising more by quite rightly taxing people over retirement age on their earned income—this 1.25%—than we are having spent on obtaining that. From the Minister’s remarks, I am not convinced that the answer will be positive, so in actual fact, we are creating a whole new tax to raise less money than it costs to collect it, for no real advantage other than a presentational one.
I thank colleagues for their contributions to the debate. It has been very wide ranging—especially the last speech—occasionally touching on the subject of the Bill and the clauses and amendments in it.
Let me start with the hon. Member for Ealing North (James Murray) who speaks for the Opposition. He asked why the dividend tax has not been brought in. The answer to that question is that it does not fall under a national insurance contributions Bill. Dividends are subject to a separate dividend tax regime. That is a tax that is already in existence and it will be handled, as the Government have already made clear, in the course of the forthcoming Finance Bill.
The hon. Gentleman asked questions about levelling up and multinationals’ tax avoidance. I think he is aware that the Government’s approach to levelling up is extremely manifest, most recently in the work that we have done with the UK Infrastructure Bank, which is specifically dedicated to net zero and levelling up and which has just recruited a world-class new chief executive. On the case of multinationals, he has obviously forgotten that the Government have been in the vanguard of the G20 and the G7 in arranging and leading on a new settlement on Pillar One and Pillar Two multinationals’ tax avoidance.
The hon. Gentleman repeated his untrue claim from the earlier debate that these measures contain no new funding for social care. In fact, as the Chief Secretary to the Treasury said a few minutes before he first said that, the measures contain £5.4 billion to support social care, which is in the plan. In case he missed it, it is in paragraph 36 of the plan. It is no wonder that those on the Labour Front Bench do not think that we have a plan if they cannot be bothered to read the plan that we have actually published.
To be absolutely clear, the question that I was putting to the Minister was: where in the Bill is there a guarantee that a single penny of this new levy will go to social care?
The Bill is designed to fund the plan and the plan has been published. The plan is perfectly explicit as to where the money is going with regard to social care and how much is going to social care. It is in paragraph 36. The hon. Gentleman only needs to look at the plan to see it.
My hon. Friend the Member for Yeovil (Mr Fysh) tabled a probing amendment and explained the background to his own amendment 7, and I thank him for that. I mean him no disrespect when I say that the Government have taken the amendment on board, and will take it on board, but I still ask him to withdraw his amendment.
The hon. Member for Aberdeen South (Stephen Flynn) talked airily about unfunded social care plans controlled, as it were, by England over Scotland. Nothing could be further from the truth. The truth is that Scotland has social care plans that are underfunded. Audit Scotland said that more money was needed. The Independent Review of Adult Social Care in Scotland said that more money will need to be spent over the longer term. Unfortunately, he also ignores what has been accurately described by the Prime Minister as the Union dividend from which all the devolved Administrations will benefit.
My hon. Friend the Member for Amber Valley (Nigel Mills) asked the important question of why a new tax. It is important to focus on this. The reason there is a new tax is that this is a fundamental change in how we have been thinking about social care. Andrew Dilnot himself has said that he does not think it inappropriate to have a new tax funded to support this.
My right hon. Friend the Member for Wokingham (John Redwood) talked about Treasury concern with hypothecation, which remains intact. There is already an existing level of hypothecation within the national insurance contributions system and this plays off that. The hon. Member for Nottingham East (Nadia Whittome) went into a long diatribe, in which she accused the Government of seeking to protect the richest people in society, to which the only simple answer is that that is absolute nonsense. I think she missed the debate on Second Reading, but if she read the distributional analysis, she would see that this package means that the 20% of highest income households will contribute 40 times the amount contributed by the least well off 20% of households. It is also worth pointing out that the highest earning 14% will pay roughly half of all revenues. Even the Wealth Tax Commission, which is independent of Government and dedicated to the idea of arguing for a wealth tax, acknowledged that the UK is on par with G7 countries as regards a wealth tax. Under a more inclusive definition—one that includes, for example, stamp duty land tax—the UK is near the top of the G7 countries in terms of a wealth tax.
My right hon. Friend the Member for Wokingham talked about hypothecation; I perfectly understand that. He also mentioned gross net revenues. These are net revenues—revenues that have been calculated net of the effects. The detail is set out in the technical annex to the published plan.
The hon. Member for Leeds East (Richard Burgon) revisited some of the themes set out by the hon. Member for Nottingham East, but I am afraid no more persuasively.
My hon. Friend the Member for Christchurch (Sir Christopher Chope) went on a glorious canter, or possibly a ramble, around various public spending concerns. I fully appreciate his concerns. Very little of what he said actually bears direct relation to the levy, but let me address the parts that do. He asked why there is no distinct social care levy. Of course, it is possible to claim, as I did, that there is a need for greater integration between healthcare and social care, without suggesting that the funding for those things needs to be handled in exactly the same way across both. This provision blends the funding in a way that is felicitous for both elements.
My hon. Friend argued vigorously for co-payment. I take his arguments as I am sure he means them and look forward to seeing his Bill. He also mentioned millionaires in hospitals. He is right that maths is eternal; our noble Friend Lord Bethell may have been referring to the fact that calculations are not eternal, but may be in time and premature.
In the Conservative party manifesto almost two years ago, we promised that we would reform social care at the same time as promising that we would not increase VAT, national insurance or any other taxes. If it had not been for the pandemic, how would we have dealt with the challenge of reforming social care without raising taxes? Surely one way of doing it would have been to reduce public expenditure elsewhere.
It is very hard for me to comment on such a remote hypothetical, but the fact of the matter is, as the Prime Minister said, no political party had a pandemic in their manifesto and we have to deal with the situation—
Order. I would be grateful if the Minister would address the Chair.
I am so sorry, Dame Eleanor. I am rightly chastised and thank you for that point.
My hon. Friend the Member for Christchurch asked why the Barnett formula applies and what will happen once it is abolished, but once again he takes the Committee to the outer reaches of speculation. The fact is that it does apply and it has thoroughly beneficial effects for the devolved Administrations as regards this piece of legislation.
With that, I ask those who have tabled amendments and new clauses to withdraw them. I commend the Bill to the House.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Destination of proceeds of health and social care levy
Amendment proposed: 4, page 2, line 29, leave out from “as” to end of line 30 and insert “determined jointly by the Treasury and the devolved governments of Scotland, Wales and Northern Ireland.”
The amendment would require joint agreement between the Treasury and the governments of Scotland, Wales and Northern Ireland as to how the levy proceeds are to be shared between the four areas and between health care and social care.—(Alison Thewliss.)
Question put, That the amendment be made.
I beg to move, That the Bill be now read the Third time.
I am grateful to all right hon. and hon. Members who have participated in the passage of this landmark legislation. I would like to remind the House, if I may, of the Bill’s provisions and its overarching goals. We may talk loosely of it as being based on national insurance contributions, or indeed as being a national insurance contributions Bill, but it is of course a separate Bill to introduce a 1.25% health and social care levy based on national insurance contributions.
The levy will be introduced in 2022. In 2022-23, it will be delivered through a temporary increase in NICs rates of 1.25% for one year only, with all revenues generated being ring-fenced and paid to NHS England, NHS Scotland, NHS Wales and the equivalent in Northern Ireland. Then, from April 2023, a formal legal surcharge of 1.25% will replace the temporary increase in NICs rates, with revenue ring-fenced for health and social care only. The levy will also then apply to those working who are over the state pension age.
The levy will enable the Government to tackle the backlog in the NHS. It will provide a new, permanent way to pay for the Government’s reforms to social care and will allow the Government to fund our vision for the future of health and social care in this country over the longer term.
I reiterate my sincere thanks to all Members who have engaged in our series of stimulating debates on the measure. I commend the Bill to the House.
(3 years, 1 month ago)
Lords ChamberThis text is a record of ministerial contributions to a debate held as part of the Health and Social Care Levy Act 2021 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
My Lords, it is a pleasure to open this Second Reading debate on the Health and Social Care Levy Bill. This is a short but very important Bill that aims to legislate the plan announced by the Prime Minister on 15 September. The plan will tackle the NHS backlog, put the adult social care system on a sustainable long-term footing and end the situation in which those who need help in their old age risk losing everything to pay for it.
The Government’s plan will make a substantial difference to the lives of millions of people across this country. It will be funded with a record £36 billion investment in the NHS and social care systems. Noble Lords will be aware that such an ambitious plan requires funding. In order to pay for a significant increase in spending in a responsible and fair way, the Bill before the House today introduces a new 1.25% health and social care levy. The levy will apply UK-wide to taxpayers liable to class 1 employee and employer, class 1A, class 1B and class 4 self-employed NICs. However, it will not apply where taxpayers pay class 2 or class 3 NICs. It will be introduced from April 2022 and, from April 2023, the levy will also apply to those working over the state pension age.
Noble Lords may be aware that it takes time for HMRC to prepare its systems for such a major shift. That is why, as set out in Clause 5 of the Bill, in 2022-23, the levy will be delivered through a temporary increase in NIC rates of 1.25% for one year only. I would like to make it clear that all net revenues generated by the temporary increase in NIC rates will be ring-fenced and paid to NHS England, NHS Scotland, NHS Wales and the equivalent in Northern Ireland. From April 2023, the temporary rise in NIC rates will be replaced by a formal legal surcharge of 1.25%. Clause 2 of the Bill sets out that this revenue will be ring-fenced for health and social care only.
It is the intention that existing NIC reliefs and allowances will also apply to the levy. That will mean that 40% of all businesses will not be affected due to the employment allowance. When it comes to individuals, those earning more will pay more. The top 14% of taxpayers will pay around half the revenue raised. Conversely, at least 6.2 million people earning less than the NIC primary threshold will not pay the levy at all.
Let me once more remind Noble Lords today why this levy is so crucial. As the Prime Minister and the Chancellor have said, this levy will enable the Government to properly fund the NHS, so that it can recover from the pandemic. Senior NHS leaders have made clear that without additional financial support we will not properly be able to address the significant backlog in the health service. To get everyone the care they need will take time and will require additional revenue.
In addition, our social care plan aims to create a dramatically expanded safety net for people in their later life. This means that, instead of individuals having to bear the financial risk of catastrophic care costs themselves, we as a country are deciding to share more of that risk collectively. This is a permanent, new role for the Government and a structural increase in the size of the British state. We therefore need a permanent, new way to pay for it. Noble Lords will be aware that the only alternative would be to borrow indefinitely. That would clearly be the wrong course of action when our national debt is already the highest it has ever been in peacetime. Borrowing ever more today just means higher taxes in the future.
We need to fund our vision for the future of health and social care in this country over the longer term. As the Prime Minister said, with proper funding, we can tackle not just the NHS backlog and expand the social care safety net but afford the nurses’ pay rise, invest in the best equipment, prepare for the next pandemic, provide the largest investment ever to upskill social care workers and build the modern, more efficient health service that the public across the UK deserve.
To conclude, this levy will enable the Government to tackle the backlog in the NHS. It will provide a new, permanent way to pay for the Government’s reforms to social care, and it will allow the Government to fund our vision for the future of health and social care in this country over the longer term. I beg to move.
My Lords, this has been an interesting debate. The quality of speakers has been very high, and I am aware that most of them know far more about these issues than I do—so it is with a certain humility that I attempt to reply. Also, as someone who does not appear that often, even I have noticed that I do not necessarily have the mood of the House with me on this Bill. However, I will spend longer in summing up than I spent in opening, to try to address some of the concerns and at least put the Government’s point of view on the many challenges that have been raised.
I will start with my noble friend Lord Forsyth, the noble Lords, Lord Eatwell and Lord Shipley, and the noble Baronesses, Lady Tyler and Lady Kramer, on the fundamental issue of the use of national insurance as the linchpin for this tax raising. We need a broad-based tax, such as income tax, VAT or national insurance, to raise the sums needed for such a significant investment. There is a precedent here. In 2003, the Labour Government increased the same NIC rates by 1%, specifically to increase funding for the NHS. There is an existing NIC ring-fence for the NHS. The NIC system already directs a ring-fenced proportion of receipts to the NHS. This ring-fence was established in 1948 and expanded by the Labour Government in 2003. I cannot provide the noble Lord, Lord Eatwell, with a cast-iron guarantee that the hypothecation will remain in perpetuity, but we see the principles here and, as my noble friend Lord Hannan said earlier, rarely do these taxes, once created, go away—so I hope to give some reassurance on that.
This also ensures that businesses contribute to the NHS. That is fair and reasonable, because they need a workforce that benefits from the NHS. Lastly, NICs apply on a UK-wide basis.
The noble Lords, Lord Macpherson and Lord Sikka, asked why we have not included rental income in the widening of the net. We have included dividends while excluding modest amounts of dividend, up to £2,000 a year. With regard to income from property, tax is currently levied at the same rates as income tax on earned income. Divergence in these rates would add complexity and create opportunities for avoidance. Those who earn their income from property have made a contribution to public finances. The property allowance has been frozen, as have the personal allowance higher rate and additional rate thresholds.
The Government are making sure that landlords continue to make a contribution. For example, we have restricted tax reliefs available to landlords. Over the past four years we have restricted relief for finance costs: it can now be claimed only at the basic rate, not at 40% or 45%. That has raised more than £1 billion. The higher rate of stamp duty for additional residential dwellings means that landlords now pay between 3% and 15% extra tax on those properties.
The noble Baroness, Lady Tyler, raised the issue of people over the state pension age, and noble Lords asked about the whole issue of intergenerational fairness. If we were to raise the sums required just for those over 40, the levy would need to be 60% higher, at around 2%. This would be a much larger burden on working people. Furthermore, around half of all the funding raised by the levy will go towards health and social care services that benefit working-age people, such as general NHS funding and vaccines. Working-age people will also benefit from limits on what they would need to pay if they themselves needed care in later life, and they will gain the peace of mind that comes from protecting their family members from substantial costs.
The noble Lords, Lord Eatwell and Lord Sikka, my noble friend Lord Forsyth and the noble Baroness, Lady Tyler, asked about the impact on the lowest paid. In relation to individuals, NICs are a progressive way to raise money: the highest-earning 14% will pay about half the revenues raised, while 6.2 million people who earn less than the NIC threshold of £9,500 will be kept out of the levy. I accept the points raised by two noble Lords about the cliff-edge nature of NIC contributions for higher earners, but the brutal reality is that, in the round, that top 14% will be paying around half of the total. That goes to the crux of this whole debate: we have tried very hard to ensure that this is a broad-based tax—as broad as possible.
Lower-income households will be large net beneficiaries from the package, with the poorest households gaining the most as a proportion of income. As was noted by one noble Lord, the highest 20% of households by income will contribute 40 times as much as the poorest 20%. One can make arguments about how much the bottom and top earn; nevertheless this is a highly redistributive approach to a difficult tax and an issue that all parties have dodged for 20 years. It is a genuinely progressive policy, and the distributional analysis published by the Treasury makes that clear.
Going beyond that, since 2010, Conservative Governments have consistently kept lower-paid people out of tax and kept the cost of living down. The income tax personal allowance threshold has increased by over 90%, meaning that a typical basic rate taxpayer now pays £1,200 a year less than they would have done otherwise. We also increased the NIC primary threshold by over £800, in April of last year, with a typical employee saving just over £100. In April of this year, we increased the national living wage to £8.91—an annual pay rise of £350 for someone working full time on the national living wage. Taken together, our changes to national insurance mean that someone working full-time on the minimum wage is currently £5,400 better off than in 2010.
The noble Lords, Lord Eatwell and Lord Macpherson, asked about the impact on employers. Some 70% of the money raised from businesses will come from the largest 1% of employers, and some 640,000 employers are excluded through the assistance at the bottom end. Again, as a Conservative Minister myself, I do not like raising taxes for anybody, but we have tried to broaden this tax as much as possible. Around 40% of businesses will not be affected by the levy. The noble Lord, Lord Macpherson, and my noble friend Lord Hannan, are not happy about a tax on jobs. The OBR will consider the economic effects of the levy in the light of its updated economic and fiscal forecasts, which will be published in the next couple of weeks alongside the Budget.
The noble Lord, Lord Eatwell, asked about the tax bill on the UK. We have had to take these difficult decisions because, as I said in my opening comments, this is a permanent increase in taxation for a permanent challenge that we face in a country with aging demographics. Our tax system remains competitive, with our tax take as a share of GDP lower than major international competitors, and broadly in the middle of the G7.
My noble friend Lord Forsyth asked about anti-avoidance rules, which is a very important question. I suspect, pragmatically, that there will be some fiddling around at the edges in the March/April threshold, but this whole piece of legislation will be subject to the full anti-avoidance rules that apply to NICs. Indeed, the recent work on IR35 would probably have been the biggest area of weakness had we not engaged in those reforms. The noble Lord might be interested to hear that even government departments are being threatened with fines by HMRC for non-compliance with IR35, so HMRC is out there already.
The noble Lord, Lord Eatwell, and the noble Baronesses, Lady Brinton and Lady Kramer, asked about hypothecation. I touched on this earlier. In 2022-23, all revenue from the health and social care levy will be directed to NHS England and equivalent bodies in Scotland, Wales and Northern Ireland through the existing NHS allocation. From 2023-24 onwards, levy revenue will be ring-fenced in law for health and social care. HMRC will pay the proceeds to those responsible for health and social care in all four parts of the UK, including NHS Scotland, NHS Wales and the equivalent in Northern Ireland.
The noble Baroness, Lady Fraser, asked about devolution and our way of handling that. This is absolutely a UK-wide problem. We have taken the decision to act on a UK-wide basis for the benefit of citizens across the UK. Scotland, Wales and Northern Ireland will receive Barnett consequentials on the additional health and social care funding in the usual way, with exact totals to be confirmed in the SR. Early indications are that, pro rata, the populations of the devolved authorities will receive more money from this approach.
The noble Baroness, Lady Brinton, asked about the funding specifically for social care. The Government are committed to spending £5.4 billion across three years on adult social care from this levy. This funding will end unpredictable care costs and include over £0.5 billion to support the adult social care workforce, in recognition of their efforts over this terrible pandemic. It includes funding to enable all local authorities to move towards paying providers a fair rate for care, which should drive up the quality of adult social care services, improve workforce conditions and increase investments.
Several noble Lords asked about funding for local authorities. We are committed to ensuring that local authorities have access to sustainable funding for core budgets at the spending review. We will ensure that every council has the resources they need to deliver these reforms.
The noble Lord, Lord Griffiths, spoke movingly and clearly understands this sector very well. I would like to reassure him that substantial support has been provided to the social care sector through the pandemic—for example, billions of items of free PPE prioritised to care workers, residents and unpaid carers for vaccination. We have made available £2.4 billion in specific funding for adult social care. This is made up of £1.75 billion for infection prevention and control, £522 million for testing, and £120 million to support workforce capacity. This funding is additional to the £6.1 billion for local authorities to deal with the impact of the pandemic on their services, including adult social care.
I turn to some specific questions on social care spending. First, on the size of the cap, the new £86,000 cap will end unpredictable care costs so that more people can preserve their savings and assets. Andrew Dilnot’s report was published 10 years ago and reflected the circumstances in 2011. Clearly, levels of wealth and asset prices have increased since then. We think that we have set the cap broadly at the right balance of achieving personal responsibility for planning for old age but putting in place a safety net where exceptional costs or periods of care are needed.
On domiciliary care, I think my noble friend—
Would the noble Lord give the House an estimate of how much a person would really have to spend before they reach the £86,000 cap? Does he agree that it will be at least double?
My Lords, more detail will be set out in the Budget and spending review in the next two or three weeks to address the noble Lord’s question.
The noble Lord, Lord Hunt, my noble friend Lord Bethell and the right reverend Prelate asked about help for carers specifically.
I apologise. My noble friend was about to answer the question on domiciliary care.
Yes, sorry. I lost my thread. There will be no changes to existing procedures.
Noble Lords asked about support for unpaid carers. Of course, they play a vital role in the care system. I suspect that there is hardly anyone here in the Chamber who has not been involved in the care of their parents at the end of their lives on an unpaid basis. I certainly had to—but luckily I am one of seven siblings and we all live in the same county. None the less, it is a considerable burden.
The Care Act encourages local authorities to support unpaid carers and to provide preventive care to stop people’s early care needs escalating. A new cap on care costs will offer greater certainty to unpaid carers and support informed decision-making and planning for the overall costs of care.
The Government will take steps to ensure that the 5.4 million unpaid carers have the support, advice and respite they need, fulfilling the goals of the Care Act. We will work with the sector, including unpaid carers, to co-develop more detail in our plans and will publish further detail in the White Paper for reform later this year—and on the matter of the White Paper, I say to noble Lords that it is not long now. It is only a couple of months; it has been promised before the end of the year, and I am perhaps a little more optimistic than some Members of the House.
Before the Minister leaves this area of exploration, does he have an answer to my question on whether the Government will pick up the costs of the additional national insurance to be paid by those to whom local government outsources services? I believe it is a yes or no answer.
I cannot give the noble Baroness a clear answer on that now. More detail will be available in the Budget and the spending review. If it does not transpire in those documents in the next couple of weeks, the noble Baroness can write to me and I will investigate further.
On the adult social care workforce, our investment is at least £500 million across the three years to deliver new qualifications, progression pathways and mental health support. This workforce package is unprecedented investment: it is something like a fivefold increase in public spending on skills and training for this sector.
The noble Lord, Lord Griffiths, asked about vaccines for NHS staff. He is correct that at the moment there is no requirement for NHS staff to be vaccinated. However, we have a consultation under way to try to find the best way through on that sensitive issue.
I have probably answered the noble Baroness, Lady Kramer, as much as I can on the compensating of NICs. Just to confirm, I say that the Government will compensate public sector bodies such as the NHS for the increased cost of employer NICs. If they did not, they would simply reduce the amount available. The Chancellor will set out more details in his spending review.
My noble friend Lord Bethell asked about NHSX funding. We remain absolutely committed to all aspects of technological improvement. Again, I am more optimistic over the long term because I believe we will find new ways of treating this sector more efficiently, and NHSX will play a part in that.
My noble friend Lord Naseby made a point about the structure of GPs’ surgeries. We will have to see some dramatic changes in that area. In my view, we cannot sustain surgeries in which five-sixths of the doctors are working only part-time, but again I think this will throw up opportunities. The two sectors will have to work much more closely together—
The Minister is straying into territory that I think is probably unwise. The noble Lord, Lord Naseby, made various assertions, but there is no proof that part-time doctors and GPs are less efficient or that this is a less efficient way of working. We know that this absolutely is not the case in lots of other places, and there is no proof that it is in this case. The Minister might be wise not to go there.
I respectfully disagree with the noble Baroness on that. Your Lordships are having a much more detailed debate on health reform very shortly, so I am sure that will be teased out in those discussions.
The noble Lord, Lord Lipsey, asked about the White Paper. As I said, we certainly hope to see that out in the next few weeks.
The noble Lord, Lord Desai, asked about the taxation of carried interest and private equity firms, but I suspect he was being slightly disingenuous as he knows we are not extending this to capital gains tax, only to dividends. No doubt there is a separate debate to be had on that, but at the moment it is a capital gain.
The essence of this debate is the fairness of the way the tax is being structured—
It is fortunate that the Minister just brought up once again the issue of fairness and the discussion of it in the House. At the beginning of his speech, he referred to the proportion of the total raised from—I think he said—the top 14% of payers. This is a completely bogus statistic and has nothing to do with fairness. Let me give him an example. Let us suppose that someone earns £1 million and there is a 10% levy. They pay £100,000 on the levy and have £900,000 left. Then let us suppose that someone earns £10,000 a year—they would still be caught by this levy, by the way—and, to keep the numbers easy, that they still pay 10%. Their income has gone down from £10,000 to £9,000 and, as Marcus Rashford has said, they are choosing whether to eat or to stay warm. To understand fairness is to understand the impact on individuals of the measures taken. Using these absolutely bogus numbers, which are not at all representative of fairness, simply distorts and degrades the debate.
I take on board the noble Lord’s points, but the reality is that the highest-paid in this country are paying the largest contribution to this tax and indeed PAYE itself. I accept entirely what he says about the impact being disproportionately greater on poorer people, but that is why we have designed the structure to protect as many people as possible. As I mentioned in my opening comments, some 6 million people will not be subject to this at all, and we have kept 40% of smaller businesses out of it. Those on higher earnings will pay a lot more, and that is an important principle, but I absolutely accept the point he made.
I am grateful for the opportunity to explain the Bill and address the issues that have arisen today, and I now commend the Bill to the House.