Health and Social Care Levy Bill

Baroness Tyler of Enfield Excerpts

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

[Baroness Tyler of Enfield (LD)]

My Lords, I declare an interest as a close family member is a long-term care home resident. Before turning to the specifics of the Bill, I will make a few general points about reform of social care, as others have done.

First, as well as looking at how the money is raised to provide a cap on social care costs and a more generous means test—as we are today—we must consider how we can best shore up a fragile and highly fragmented sector reeling from the impact of the pandemic, increased costs and low occupancy rates, with some care homes becoming increasingly financially unviable. Immediate funding is needed to improve the quality of care and introduce minimum standards for care homes.

Secondly, we urgently need a new deal for the care workforce, with action on pay, training development, career progression, professionalisation and recognition. In my view, care staff, who have given so much during the pandemic, deserve to be paid well above the minimum wage. Thirdly, and as the noble Lord, Lord Forsyth, pointed out, half the adult social care budget is spent on working-age adults—often people with learning disabilities—many of whom do not own their own home. So framing this whole social care debate in terms of trying to prevent older people having to sell their homes is only one part of a much bigger picture. Finally, the social care sector is complex and little understood, with both large and small providers providing both domiciliary care and care in care homes—something I hope I can expand on when we have our debate on Thursday.

The Bill takes forward the Government’s decision to introduce a new tax to pay for social care, beginning as a 1.25% rise in national insurance from next year and then becoming a separate tax on earned income from 2023—the levy. It is estimated to raise £12 billion per year.

As others have already said, raising this money primarily from national insurance is regressive, falling disproportionately on the young and low-paid. While I welcome the fact that the levy will be payable on dividends and pension earnings, which is a step forward, there is no getting away from the fact that this tax will impact hardest the lowest earners and youngest, as the noble Lord, Lord Hunt, said, as well as hammering small businesses. The threshold for paying national insurance contributions is lower than the income allowance threshold, so a worker has to earn only £9,560 to start paying NI contributions, as opposed to £12,570 for income tax. The rate paid on national insurance falls as earnings increase, in contrast to the more progressive structure of income tax.

As well as its regressive nature, national insurance is levied only on earnings and not on unearned income, so those in work contribute more. In addition, increasing national insurance increases the tax gap between employees and the self-employed, and the gap between the tax that people pay on their employment income and the tax that they pay on income from renting out property. Those last two points were compellingly covered by the noble Lord, Lord Macpherson.

None of this feels fair to me. As Paul Johnson, director of the Institute for Fiscal Studies—much quoted already in this debate; I hope he is listening—has said previously:

“Funding social care just from national insurance would be very inequitable.”


He pointed out that the levy on employee earnings and employer wage costs, despite applying to working pensioners and running alongside an increase in tax rate dividend—we do not know what that will be yet—remains

“a tax which will be overwhelmingly borne by workers with very little coming from pensioners.”

That is a serious concern.

We already know that the vast majority of the money raised will go to the NHS, including £5 billion for healthcare in the devolved nations, to increase capacity and help with the backlog of treatments built up over the pandemic. Of course that is much needed, but it leaves only £5.3 billion to be allocated to social care, and the bulk of that—£2.5 billion—will fund the cap on lifetime care costs. Ultimately that leaves, by my calculation, some £2.8 billion over three years for social care reform, which is so much lower than many respected commentators, such as the Health Foundation, have said is needed. Indeed, a total reform package which included investment to improve access to social care, paid workers decent wages and enabled providers to deliver higher-quality care is estimated by the Health Foundation to cost about £12 billion, as the noble Lord, Lord Hunt, said. That sounds a lot but, to put it in perspective, it represents about a month’s NHS funding or 0.6% of GDP.

Now that the Government have finally published their proposals for social care, it is time to start the long-overdue cross-party talks that have been promised for years to bring on a proper, long-term, sustainable solution that ensures that everyone gets the quality care they need, which this short-term fix clearly does not. For me, nothing should be off the table in those long-term cross-party talks; they should certainly include looking at other sources of income and wealth. It seems illogical that income from property rental is excluded, so we end up with a situation whereby a relatively low-paid pensioner earning a little extra to help make ends meet will end up paying national insurance, whereas a property owner receiving a good income from rent will pay nothing, a point made by the noble Lord, Lord Eatwell. To throw in another idea, how about taxing the IT giants in the digital economy—the Facebooks and Googles of this world—so that they can start making a proper contribution to health and social care?

I have long believed that we should look for a long-term solution through the prism of intergenerational fairness, in which all generations contribute but no one generation is impacted unfairly. That will be vital to ensure greater buy-in across the generations. Although it may be a bit out of fashion, I have always sympathised with the recommendation of the Barker commission back in 2014 that the over-40s pay an additional national insurance contribution earmarked for adult social care. However, proper cross-party talks involving a wide range of stakeholders are far more likely to come up with a long-term funding solution that sticks, rather than being a political minefield in every general election.

This is a deeply flawed Bill which fails to set out a plan to fix the crisis in social care or improve pay and conditions for social care workers. Only a small proportion of the money raised will go to social care over the next three years, and even that is not guaranteed. It is deeply concerning that there is no commitment that Parliament will get a vote on the social care plan when it is finally published before spending the money it raises.

I end by asking the Minister to explain more convincingly than I have heard so far why the Bill was brought forward before details of the Government’s social care reform plans for England have been published—which is very much the wrong way round, as many other noble Lords have said. Can he also clarify whether the cap on lifetime costs will be available only for those starting care from 2023—that is, it will not apply to those already in the system? If that is the case, it strikes me as very unfair.