Health and Social Care Levy (Repeal) Bill

Lord Lipsey Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 17th October 2022 Lords Chamber

[Lord Lipsey (Lab)]

My Lords, I do not know what set that phone off. There is no need to drown me out just because I am going to speak.

This has been an enjoyable debate for those of us who think that the scrapping of the levy is a disaster. I particularly enjoyed the speech of the noble Lord, Lord Macpherson, and all the wisdom he brings to these matters from his experience in the Treasury. I had a rather wicked thought that the Government could consider one more U-turn when they read his remarks: on the sacking of Sir Michael Scholar, the splendid Permanent Secretary at the Treasury, no doubt because he suggested that there were some things wrong with the Government’s proposals. If they had listened to Sir Michael they might not be in this complete and utter mess today.

[Lord Hunt of Wirral (Con)]

It was Tom Scholar, Michael’s son.

[Lord Lipsey (Lab)]

Sorry; I know Michael better than Tom. I thank the noble Lord for that correction.

Let us be in no doubt: this Bill is another U-turn, not by the Truss Government—they have got in so many—but on this Conservative Administration’s policy. The levy was brought in by the Johnson Government as a way of funding the changes they wanted to make in health and social care, which I will speak more about later. The contributions will now be frozen under this legislation, if it goes through Parliament. That means that there will be more spend, less tax and another mighty addition to the fiscal deficit. I hope, for the Minister’s sake, that the markets are looking elsewhere today—they have plenty to look at.

The revenue to pay for the extra spending has been ditched, but I wonder what will happen to the Government’s policies that these contributions were supposed to fund. In particular, what will happen to the Government’s scheme to introduce a cap on what individuals have to pay for social care? Will this be another U-turn? Has the cap passed on? Is it no more? Has it ceased to be, expired and gone to meet its maker, as with Monty Python’s parrot?

In fact, I would be very pleased if the cap was a victim of the Government’s unwillingness to put up national insurance contributions. The cap has three enormous flaws in today’s circumstances. First, it adds hugely to the fiscal deficit—according to Library figures, £13 billion a year. That is not a small number. I know that we get used to billions these days, but £13 billion is a substantial sum of money to be added to the deficit as a result of giving up this increase. The more the fiscal deficit goes up and the more the markets are scared of it, the more we have a problem. We know what will happen, broadly: fuel prices will go down and interest rates will go up. Most mortgage holders will be struck with a further blow to their pockets when they are reeling from the cost of living crisis. You honestly could not make it up as a policy. That is one reason against the cap: it is jolly expensive.

The second reason is more obscure: the scheme that the Government have come up with is unworkable. They are going to trial it in one or two areas. Local authorities, quite rightly and quite reasonably, are screaming at the cost and unviability of it. The Government might have to drop it simply because it does not work. Funnily enough, that might suit them rather well: they do not want to ditch it and admit to yet another U-turn; if it has to go for administrative reasons, that is a better excuse than the fact that they have an unworkable scheme to get out of—it is also now unaffordable.

Thirdly—my noble friend Lord Sikka and others have referred to this—what gets me about the cap is this: it is exactly the same as the income tax changes made in the mini-Budget. It is a simple way of taking money from the poor and giving it to the rich. Only half of those needing care have to pay for it themselves; the rest are funded one way or another by the Government or local government. It follows that only the better-off half of the population will benefit from this cap, but it gets worse. Take just the richer half—nobody who is not in the richer half gets anything. The poorer half of that group will do much less well than the richer half of the group. That is especially so because—noble Lords will remember the row we had about it in this House and in the other place—the Government are insisting that any money local authorities have paid towards people’s care should be knocked off the cap. So here we have small amounts of money going to the poorer, but what a bonanza for the rich. Be you a millionaire, a multi-millionaire or billionaire, the maximum you have to pay for your care is capped at £86,000—and you can keep the rest. If you get better, you can go out on your yacht again, and even if you do not get better, when you die you will have all the more money to leave to your kids.

This is not a sensible priority because there is an enormous problem with social care at the moment. It is not so much a problem of who pays for it as who gets it. Noble Lords will have seen the utterly terrifying report last week from Skills for Care. It is an official government policy. It shows the deepening shortage of care workers and the grotesque underpaying of social care workers—they are hopping off from their care shifts, doing some of the most intimate and desirable things a human being can do, to go to the tills in the supermarket. Those are real problems and they are leading to real suffering for real individuals who need care. To prioritise over that necessity giving more money to the poor old rich so they do not have to fork out for their own care makes no sense. It is genuinely immoral.

I will summarise my argument so far:

“returning contributions to their previous level is regressive … It benefits higher earners more, both in cash terms and proportionally, than lower earners. It benefits the poorest not at all.”

That is the admirable Paul Johnson from the Institute for Fiscal Studies, who knows of what he speaks.

For all those reasons I hope that, when the Minister rises tonight, he will announce that the cap is dead and gone. I noticed he did not refer to the cap once in his speech. He said that funding would be maintained, which is a very different thing. If he meant that funding on care would be maintained rather than funding on this blessed cap, I would be very pleased, although I expect that when he replies—the Minister is a most able master of this House—he will say that the Government have no plans to get rid of the cap. It is a useful Civil Service phrase that has no content whatever because if the Government do not have plans now they can develop them tomorrow if they need them. I expect the Minister to say that the Government have no plans to abolish the cap. That does not stop them later on taking measures to abolish the cap. This is at a time when we are going through huge public expenditure cuts. This is a huge addition to public expenditure that has to be met and which makes cuts in other things more strict.

However, it is perfectly possible that the markets will deal with this when they see how the Government are squandering money on this handout to the rich. The markets, although populated by rich people, know the political disadvantages of assisting them, and may well smell a rat here. Alternatively, the Government could go ahead with this ill-designed cap, which would show what the mini-Budget has already demonstrated: that this Government are concerned only with how much money they can stuff into the pockets of the rich.