Health and Social Care Levy

Jesse Norman Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

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.

[Sir Desmond Swayne (New Forest West) (Con)]

What estimate has the Minister made of the impact of these measures on the ease or indeed the difficulty of securing continuing NHS care?

[Jesse Norman]

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.

[Several hon. Members rose—]

[Jesse Norman]

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.

[Jake Berry (Rossendale and Darwen) (Con)]

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?

[Jesse Norman]

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.

[John Redwood (Wokingham) (Con)]

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?

[Jesse Norman]

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—

[Chris Bryant (Rhondda) (Lab)]

Will the Minister give way?

[Jesse Norman]

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.

[Rachael Maskell (York Central) (Lab/Co-op)]

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?

[Jesse Norman]

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.

[Mr Clive Betts (Sheffield South East) (Lab)]

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?

[Jesse Norman]

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.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

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.

[Jesse Norman]

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.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

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?

[Jesse Norman]

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.

--- Later in debate ---

[Rachel Reeves]

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.

[Jesse Norman]

Will the hon. Lady give way?

[Rachel Reeves]

I would be very happy to.

[Jesse Norman]

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.

[Rachel Reeves]

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.

[Jesse Norman]

rose—

[Rachel Reeves]

The Minister has had a chance and he did not manage it. I will take an intervention from my hon. Friend.

[Rachel Reeves]

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—

[Jesse Norman]

Will the hon. Lady take an intervention?

[Rachel Reeves]

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.

[Jesse Norman]

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.

[Rachel Reeves]

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.