BREAKING NEWS
This content is not available in your region

UK PM's planned tax hike for social care triggers fury within ruling party

Access to the comments Comments
By Reuters
UK PM's planned tax hike for social care triggers fury within ruling party
UK PM's planned tax hike for social care triggers fury within ruling party   -   Copyright  Thomson Reuters 2021
Text size Aa Aa

By Andy Bruce and Elizabeth Piper

LONDON – British Prime Minister Boris Johnson’s plan to hike taxes to fund social care has provoked fury among many of his own lawmakers, who fear that such a clear violation of his election promises shows he is happy to oversee a sweeping expansion of the state.

After the fiscal splurge on the COVID-19 pandemic, Johnson is now addressing Britain’s creaking social care system, whose costs will soar as the population ages, while facing numerous other thorny policy matters.

Johnson wants to raise the National Insurance (NI) tax paid by working people to subsidise care for pensioners, including wealthy retirees, according to British media.

But many lawmakers from Johnson’s own Conservative Party worry this will hurt younger, low-income workers and breach his 2019 election guarantee not to raise the rate of NI – which still adorns the Conservatives’ website.

“The proposal will be aimed at supporting the more affluent, but the tax will be paid by lower income earners. That’s unfair,” one Conservative lawmaker, who declined to be named, told Reuters.

“We shouldn’t break solemn election promises unless there are hugely good reasons to do so.”

Like many other Western leaders, Johnson is facing demands to spend more on welfare after government borrowing ballooned to 14.2% of economic output – a level last seen at the end of World War Two.

The row over his planned tax hike comes after charges that Britain was unprepared for the chaotic fall of Afghanistan, while the country is also facing labour shortages and supply chain problems exacerbated by Brexit, as well as a high COVID-19 death toll.

Johnson is due to address parliament on the Afghanistan situation later on Monday, and the BBC said he would shortly announce a new 5.5 billion pound ($7.6 billion) package for the National Health Service. Details of the NI hike are likely to come later, possibly on Tuesday.

‘TAX-AND-SPEND

For years, British leaders have been trying to find a way to pay for social care without endangering support by hiking taxes. Johnson said he had a plan for social care in 2019.

British ministers are still thrashing out the details but Johnson had been expected to announce a roughly 1 percentage point increase on the rate of NI paid by workers and their employers, which official estimates show would raise around 10 billion pounds a year.

“With regards to our plans for social care, we are committed to setting out long-term sustainable reform of the sector and that is what we will do,” Johnson’s spokesman told reporters on Monday. The finance ministry declined to comment.

While Johnson’s huge majority of 80 in parliament means a defeat may be unlikely, members of his own cabinet have hinted at their opposition to tax hikes.

House of Commons leader Jacob Rees-Mogg on Sunday invoked former U.S. President George H.W. Bush, who came to regret saying “Read my lips: no new taxes” during the 1988 election campaign.

“(Voters) remembered those words after President Bush had forgotten them,” Rees-Mogg wrote in a Sunday Express opinion piece.

Many of Johnson’s lawmakers fear raising taxes will alienate many of the voters in northern England who supported him in the 2019 election, when he promised explicitly not to raise income tax, Value-Added Tax or National Insurance.

BIGGESTEVERBENEFITCUT

Johnson also promised in 2019 to maintain the “triple lock”, which annually links the state pension to whichever is highest out of inflation, earnings or a 2.5% increase.

Owing to a statistical quirk during the pandemic, the official measure of earnings is running at almost 9% – which would result in a bumper payout to pensioners just as the government has stressed the need to tighten belts.

“Given that average wage levels have been skewed by the unprecedented events of the past 18 months, the (finance minister) should temporarily suspend the wages element of the lock,” said Mel Stride, who heads parliament’s Treasury Committee of lawmakers.

Johnson faces more widespread resistance to plans to remove a 20 pounds-per-week increase to state benefits, known as Universal Credit, that was introduced at the height of the pandemic. The move would affect 4.4 million households from mid-October.

“If the (government) goes ahead with this cut, it would be the largest overnight benefit reduction that has ever happened,” researchers Torsten Bell, Adam Corlett and Daniel Tomlinson said in a report published by the Resolution Foundation think tank on Monday.

“That should give policy makers reason to pause as to whether this is a good idea – politically, economically or morally.”

($1 = 0.7225 pounds)