Health and Social Care Levy Bill

Lord Shipley Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. Like others, I was very surprised by the speed with which the Bill passed through the House of Commons. I was even more surprised by the lack of challenge to it. As we have heard from right across the House this afternoon, national insurance is the wrong tax to use. Calling this a levy makes no difference. It is a tax. It is a change to the tax system worth £12 billion a year for three years—indeed, inevitably, longer than that.

It is a tax on work and it is more regressive than income tax because the rate charged reduces at higher earning levels. Those earning under £967 per week pay national insurance contributions of 12%, but those earning over that level pay only 2% on earnings. If speed is needed, using income tax would be fairer, because the threshold for paying national insurance is lower than it is for income tax. Thus, this levy hits the lower-paid more. As we have heard, those paying income tax have a personal allowance of £12,570, but the national insurance threshold is £9,568 for employees and £6,515 for the self-employed. Most of the revenue for the new levy will come from workers earning under £50,000. That is particularly unfair to younger workers.

Reference has been made to the briefing note from HMRC. I repeat this point, because it is important. The briefing note says that the Financial Secretary to the Treasury has agreed that:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”


It is astonishing that the Government find this acceptable. They have declared that they are pursuing a policy of levelling up. You cannot level up places without levelling up people, but you cannot level up people on low incomes by increasing the amount of tax they pay.

The context of the Bill is a tax burden which will be the highest in 70 years. At the same time, inflation is rising to over 4%, energy costs are spiralling and there is now talk of council tax rises of over 5% each year for several years. I submit that we cannot go on imposing high council tax rises year after year to help meet the cost of adult social care. The Government introduced the social care precept in 2016 at up to 3%, yet council tax is regressive. Council tax rises impact disproportionately on poorer people.

Yet the demand for social care is rising. Councils need an extra £2.6 billion a year simply to maintain current levels of social care, but they will get only £5.4 billion from the new levy over three years. Will there be enough money for social care? What is the spending profile for social care over those three years? How much will go to the NHS and how much will come to social care?

It could be argued that national insurance is easier for the Treasury to impose since it is relatively easier to administer. However, it hits the lower-paid and younger people most. A 1p increase in income tax, as my noble friend Lady Brinton has suggested, would at least raise contributions from better-off pensioners.

Council tax is being used to support adult social care based on property values of 30 years ago. It is, as I said, a regressive tax: those in lower tax bands pay higher effective tax rates than those in higher bands. One policy suggestion made recently by the Housing, Communities and Local Government Committee in the House of Commons is for a proportional property tax to replace council tax and business rates. I hope the Minister will agree that the time has come to look very closely at that suggestion.

This is an inadequate Bill, rushed through and ill thought-through, which will not solve the care crisis. I hope the Government will take note of the fact that most speakers today have found the Bill wanting.