Health and Social Care Levy Bill

Debate between Baroness Hodge of Barking and Taiwo Owatemi

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I hope that the hon. Member for Yeovil (Mr Fysh) will join the Opposition in the Lobby tonight given what he has just said in his contribution.

We should give credit where it is due. We are starting a debate not on whether we can rescue our broken health and social care services, but on how we do so. These services were damaged not just by covid, but by a decade of savage cuts. Tragically, the Government are flinging away this once-in-a-lifetime opportunity to do something that will endure, that will tackle the underlying problems facing these critical services, and that will be fair to us all—whatever our age, wherever we live and whatever our income.

These shambolic proposals will not meet the needs of the elderly and disabled who depend on social care. They will not properly protect our NHS. They will further ravage struggling local authorities, and the tax proposals are needlessly regressive.

I wish to focus on the tax. The health and social care levy is an unfair hike that will hit younger working people the hardest.

[Taiwo Owatemi (Coventry North West) (Lab)]

Does my right hon. Friend agree that it is completely unfair that a graduate nurse who works a night shift as an Uber driver now faces a £12,500 tax hike over their working life due to this new levy? That is the reality facing many of my constituents. It is high time that we start calling this measure what it is. This is not a social care levy; this is the workers’ tax.

[Dame Margaret Hodge]

My hon. Friend makes the point very powerfully. I was going to illustrate it more generally by saying that families whose personal allowance will be frozen, such as the one she mentioned, and who lose the £20 a week from universal credit cuts—the very families that the Government proclaim they want to level up—will suffer.

Do not just listen to me. I am going to re-quote the quotation that my hon. Friend the Member for Ealing North (James Murray) used in his excellent speech. Listen to what the Government’s tax authority, HMRC, says:

“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.”

Is that what the Government really want?

Half the revenue will be paid by people who are under 45, most of whom will be hit by a 10% rise in NICs. That is regressive. National insurance kicks in at a lower level of earnings than income tax. That is regressive. The self-employed pay a lower rate. That is regressive. Income from assets such as rent from property remain untouched. That is regressive. And squirreled away in the policy document, the Government say that they expect that

“demographic and unit cost pressures will be met through council tax…and long-term efficiencies.”

That means further cuts and a hidden hike of the outdated council tax—a tax that hits those in Barking and Dagenham harder than those in Kensington and Chelsea. That is also regressive.

I am rather tired of being told by the Government that there is no alternative. There are plenty. For a Government committed to fairness between individuals, fairness between generations and fairness between income secured through wealth as well as work, there is a raft of better ways to fund health and social care. Put a penny on income tax and equalise rates for dividend and income tax: £13 billion. Equalise capital gains and income tax rates: £14 billion. Or, as suggested by academics Advani, Summers and others, plug the unfair gaps in national insurance by extending it in full—not just the levy, but all of it—to all investment income and working pensioners: £12 billion. If we scrapped the upper earnings limit and equalised the rates of NICs paid between high and low earners, we would not just raise enough to meet roughly the same amount as the Government propose; we could cut the main rate of NICs by 1.25 percentage points.

This unfair plan is simply not fit for purpose. The numbers do not stack up. The poor will pay for the rich. The young will pay for the old. The struggling tenant will pay for the wealthy landlord. The asset-poor worker will pay for the asset-rich retiree. Make no mistake: these are political choices—choices that fail working people, fail our NHS and fail those in desperate need of quality social care. I cannot support them.