Analysis Politics

Health and Social Care Levy to hit young and low wage earners the hardest

Boris Johnson breaks manifesto promises by hiking National Insurance and dumping the triple lock

Article Thumbnail

Image Credit: Ellis O'Brien

When Prime Minister Boris Johnson arrived at the House of Commons yesterday, Tory backbenchers were seething with angst and uneasiness. Despite the Cabinet signing off Johnson’s decision to break two manifesto pledges in the space of one day, there were clear signs of resistance to this political gamble in the build-up to the announcement. To describe the events of yesterday as a ‘quasi budget day’ is not too far from the political reality and the consequences of the calculation to ditch the Conservatives’ low tax and spend mantle will likely still be unfolding come the next general election.

The 1.25 percent rise in National Insurance and obvious manifesto breach was presented by Johnson as acceptable due to the impossibility of foreseeing the advent of a global pandemic back in 2019. A “global pandemic was in no one’s manifesto” he proudly declared. Unlike Theresa May’s disastrous decision to exclaim that “nothing has changed” after she altered her social care policy, Johnson acknowledged breaking his manifesto commitments, but is hoping that voters will approve of a willingness to take “tough decisions” to clear the NHS treatment backlog.

The rise will hit young and low wage earners the hardest, with the Institute for Fiscal Studies estimating that 64.2 percent of the revenue generated from the rise will be collected from under 50-year-olds, in comparison to only 1.4 percent from those over 66 years of age. It is therefore no coincidence that a survey conducted by YouGov on 7 September found that 62 percent of 18–24-year-olds perceived the rise as unfair, while 60 percent of 65+ year olds regarded the tax change as fair.

To appease suggestions that the Conservatives have prioritised pensioners and the elderly, Therese Coffey, Secretary of State for Work and Pensions, later announced the government’s decision to abandon the triple lock formula for the state pension. This second manifesto U-turn did not receive the attention it deserved, as political commentators and the public were still digesting the political repercussions of the Health and Social Care Levy.

The Health and Social Care Levy will generate £36 billion according to the government’s estimate, although it is critical to unpack where this money will go. Sky News’ Political Correspondent Kate McCann has astutely highlighted that it is not certain “how much money social care will actually get and when”, as the first destination for any money raised is clearing the NHS backlog -  a task NHS bosses have suggested could take as long as ten years.

Throughout Johnson’s Commons performance, frequent references to an awareness of the social care costs dementia patients suffer exposes his fear that the Social Care Levy will be weaponised by his political rivals.  This would most likely take the form of portraying the Levy as May’s “dementia tax” 2.0.  The new changes such as the £86,000 cap on social bills will only start to come into effect from October 2023, although the NI rise will start as early as April 2022.

Tax rises were always extremely likely due to the excessive borrowing which has been necessary for the furlough scheme and the UK’s vaccine rollout plan, although increasing National Insurance contributions hits young people’s finances particularly hard, and simply adds to their fiscal hardship. With most young workers either experiencing student loan debt, extortionate renting prices or both, the estimated rise of £1,381 to wage earners on £20,000 a year is an additional expense they could do without.

Opposition to the National Insurance rise appears to have waned on the Tory backbenchers. Jacob Rees-Mogg couldn’t hold back from expressing his own misgivings towards the rise when he referenced former President Bush’s failure to keep to his own election mantra of “read my lips: no new taxes”. While writing for the Daily Express, Rees-Mogg inferred that raising taxes could have severe political consequences at the next election. The likelihood of a general election before 2024 is now extremely low and it is significant that the bill repealing the Fixed Term Parliament Act has passed its second reading. The prime minister will most likely choose the optimum time to call an election, and this is never going to fall in a period of steep tax rises.

Starmer has challenged Johnson’s tax hike in his usual fashion. The substance in Starmer’s attack lines is relevant and exposes the shallowness in portraying the tax rises as fair, however his delivery is once again lacking. Highlighting the unfairness in landlords with multiple properties not paying more, while the working classes faced the prospect of a “double whammy” in tax rises and a cut to universal credit concisely captured the heart of the problem. But… no political poignancy was given to the point, as a reference to the constituent in one of Johnson’s northern seats who will now face higher living costs was absent. The opportunity for Labour to make a relatable pitch to northern voters was lost.

With the Social Care Levy passing through Parliament comfortably by a majority of 71 votes, it will be interesting to see in the coming days whether the Conservative Party uses rising spending costs and taxes to remake Conservatism in a Johnsonian guise. A reshuffle of Johnson’s top team would emphatically signal to the electorate an intention to kickstart a domestic agenda delayed by Covid.

Camilla Tominey’s suggestion that the tax rises represent the death knell of Conservatism is premature and is representative of the usual reactionary backlash which greets leaders who decide to defy their own parties’ orthodoxies. However, to describe the Health and Social Care Levy as the death knell for the Conservatives’ support with younger voters may not be such a stretch…

Latest in Analysis