Health and Social Care Levy

Edward Leigh Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[Sir Edward Leigh (Gainsborough) (Con)]

For a low-tax Conservative, it is relatively easy to attack this measure—indeed, I could spend my entire five minutes doing so. I could quote the fates of previous conservative Governments, whether led by President George Bush in America or John Major here, who have put up taxes dramatically—John Major did so in a recession—and been punished at the polls. It is relatively easy to attack this measure but much more difficult to provide an alternative. The manifesto point need not be laboured. Labour produced a manifesto with all sorts of spending promises in 2005 and, arguably, they had more chance of foreseeing the global crash in the markets that followed during that Parliament than we ever had in foreseeing a pandemic. So I do not think the manifesto attack holds water.

I declare an interest, as it has always been a principle that once someone reaches pensionable age they get their state pension and do not go on paying national insurance contributions. Many people will feel aggrieved about the position on that; a constituent has written to me angrily saying, “I am 68. I stopped paying NICs at 65 and now you are asking me to pay them again.” That is a fair point, but this meets the challenge of, “Why should we subsidise pensioners at the same time as we are increasing NICs on the young?” Again, it is easy to attack but difficult to come up with an alternative.

The point about London and the south-east is an easy point of attack. Someone can buy a pleasant house in my constituency for less than £100,000 but that would not buy them a shoebox in London. Are we actually subsidising people who own million-pound houses in London? They can spend 30 years in a care home and can pay a very small proportion of that, because they can leave £900,000 to their children.

All these attacks can be made, but what is the alternative? That is what I ask the Labour party. They will not be a credible alternative Government unless they come up with a plan. I will happily give way to any Labour MP who says, “Right, I do not want to increase NICs. I shall increase income tax.”

[Wera Hobhouse (Bath) (LD)]

I am struggling to understand the argument made by those on the Government Benches. In 2016, £350 million per week was promised to the NHS once we left the European Union. We have left the EU, but what has happened to the £18 billion? Should the NHS not automatically expect that money, given that on 1 January we left the EU?

[Sir Edward Leigh]

It is very nice to be intervened on by somebody who has no chance of forming a Government.

I am afraid that all this talk of a wealth tax or a tax on dividends does not even begin to meet the problem. If we have a wealth tax, what happens in respect of two old-age pensioners who have almost no income and just have a capital asset? Is it fair—

[Jake Berry]

Does my right hon. Friend accept that this may be a fairer system if those in receipt of a pension but not working were asked to contribute to it in some way? Let us consider the position of people who are going to work in Tesco in Haslingden—it is in the constituency of my hon. Friend the Member for Hyndburn (Sara Britcliffe), but on the border with mine—and are struggling to buy school shoes for their kids or pay their mortgage. Why should they pay so that a relatively well-off pensioner does not have to?

[Sir Edward Leigh]

May I say to my right hon. Friend that he gave one of the best speeches this afternoon? It was thoughtful and incisive, and at least he is trying to develop an alternative argument. The Government—this is the problem with being in government—are faced with a crisis now and they have to find the money now. Regretfully, nobody has come up with a better plan than this. I am no toady to the Government, and I say to them that I do not think they can solve these problems by our constantly becoming a tax-and-spend party, as that is simply not going to wash.

We have been spending money like there is no tomorrow. I know there is a pandemic on, but the furlough scheme is riddled with corruption. I know from massive anecdotal evidence in my constituency that many companies are ripping us off left, right and centre. So the Government have to have more of a vision that they articulate: that we accept that there is a pandemic, that the NHS is in crisis and that we have to do something about care homes, but we do have a plan to control public spending. I know that the Chief Secretary agrees with me, but he may not want to leap to the Dispatch Box to say that now, especially as a reshuffle is imminent.

There are innovative solutions we can use to try to encourage people to take more control of their healthcare. John Major was hardly a fanatical right-wing Conservative, but he offered tax relief to pensioners who took out healthcare—we have never even considered that. The argument could be made that rather than having arbitrary limits such as £86,000, we could base this on the value of the house. So there are alternatives available.

I wish to articulate one thing before I sit down, and it relates to state insurance. I am trying to develop an alternative plan in the future. We know what Germany does and we know that it has an excellent system. Lord Lilley argued yesterday in a paper, and the Dilnot commission argued, that there is an alternative to all this. The Government dismiss private insurance straightaway. It is true that private insurance companies will not take over this burden alone, because they cannot foresee how many people will be very frail and stay in care homes for a long time. But why can we not have a system by which we underwrite private insurance? The state would offer insurance. Once someone is of pensionable age, they would enter the scheme. There would be a modest charge on their home, based on the value of the home. The premium, on average, would be covered by the Government, not by the person. On average, it would be £16,000 a year and it would be the covered by the Government, but that individual would have that peace of mind. That is an innovative scheme. It was suggested by the Dilnot commission. I do not understand why the Government have simply just ruled it out and said, “We have looked at private insurance and it simply will not wash.”

Many of us will be supporting the Government tonight—I know it is a bit of a cliché to say, “With a heavy heart”. We will be doing so because we recognise that the NHS is in crisis. However, we say to the Government: “When you just pump more and more money into a socialist construct like the NHS, you get lower and lower productivity. So we want to look at outcomes. We don’t want to just accept this argument that we are in an arms race with the Labour party, because they will always offer more than us.” So we want some answers from the Government on serious plans for the future and on controlling waste and low productivity in the NHS. We want to know how much of this money will actually go into the care home system. We can then vote for the Government with an easier conscience.

Health and Social Care Levy Bill

Edward Leigh Excerpts

Committee stage & 3rd reading
Tuesday 14th September 2021 Commons Chamber

[Jesse Norman]

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.

[Sir Edward Leigh (Gainsborough) (Con)]

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.

[Jesse Norman]

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.