Social Care: Who should pay, other than those who benefit?

Guest post by Dr Wesley Key

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When Boris Johnson became Prime Minister in July 2019, he promised from outside 10 Downing Street that “we will fix the crisis in social care once and for all.” With his premiership since being dominated by Brexit and then Covid-19, little has since been heard about how this may be achieved, but reports in July 2021 suggest that a rise in the basic rate of income tax or in National Insurance Contributions (NICs) is being considered in order to increase Social Care funding for England. Such a move would break a Conservative manifesto pledge and would also be highly contentious in terms of intergenerational fairness.

Other potential options put forward to help to fund Social Care (and other public services) in England have included: An extra tax on people aged 40-plus (similar to the system in Japan), levying NICs on private pension income, reducing tax relief on pension contributions (to a maximum of 20% for higher rate taxpayers), raising the Upper Earnings Limit (UEL) for NICs, and making workers over state retirement pension age liable to pay NICs at the same rate (or a reduced rate) as ‘working age’ employees. Work by the IFS in 2018 implied that NICs paid by workers over state pension age could potentially raise £1-1.5 billion annually, not accounting for the behavioural changes that such a policy would inevitably lead to. Regardless of the amount of revenue raised, such a system would be morally justifiable in terms of: Older workers losing their current privileged position within the personal taxation system; older people who are sufficiently healthy to carry on paid employment helping to fund the social care needs of others in their birth cohort who are in poorer health (perhaps due to working in more physically demanding job roles earlier in life).

Whilst this reform would see the national insurance system return closer to its Beveridgean roots (Beveridge did not intend that NICs were solely a way of accumulating state pension entitlement), it would be insufficient to properly fund a Social Care system that included a lifetime cap on care costs along the lines of that proposed in the Dilnot Report on Social Care: Commission on Funding of Care and Support, 2011. It is therefore also recommended that the UEL for National Insurance contributions is significantly increased, along with the NICs rate for earnings above the UEL, as it is iniquitous that, in 2021-22, earnings over £967 a week are liable to just 2% NICs, compared to 12% NICs paid on earnings of £184-967 a week.  

By reforming National Insurance in the above ways, this could help to better fund England’s creaking Social Care system, potentially enabling a lifetime care costs cap to be introduced, and without raising taxes on employees aged under 66 who earn less than £50,000 per year. Such an approach would be compatible with Boris Johnson’s 2019 pledge to ‘fix’ social care and with retaining his expanded support base among lower paid working age people across the Midlands and Northern England. It would also be justified in terms of intergenerational fairness in a period when government spending on pensioners has risen by more than spending on younger age groups.

New ‘summer eating allowance’ hard to stomach for low earning taxpayers

Rishi Sunak on the economy and lessons learnt from the Covid-19 ...

[This is a guest post by Dr Wesley Key, Senior Lecturer in Social Policy at the University of Lincoln.]

The announcement on 8th July 2020 by Chancellor Rishi Sunak that the government will refund 50% of the cost of meals out during Mondays-Wednesdays in August 2020, at an estimated cost to the taxpayer of £500m, will, for many reasons, be hard to stomach for low paid working age taxpayers who cannot afford to eat out themselves. For such people, paying the rent, heating their homes and feeding their children will often leave little or nothing left over for dining out.

This new ‘summer eating allowance’ is likely to disproportionately benefit affluent older people with high levels of disposable income, whose custom typically helps to sustain many eating outlets during the mid-day/afternoon periods of the working week. The very same affluent older people who have qualified, with no means test, for free prescriptions aged 60-plus, for a free TV licence if a household member is aged 75-plus (up to August 2020), for a Winter Fuel Payment if a household member has reached state pension age, and for free local bus travel if they have reached women’s state pension age, regardless of their gender. The very same older people to benefit from the seven-fold rise in UK private pension income during 1977-2016.

Low paid and benefit dependent parents may also wonder why Chancellor Sunak is splashing out such a large sum of taxpayers’ cash, given that it took the efforts of Manchester United footballer Marcus Rashford to change government policy on 16th June 2020 to ensure that children eligible for Free School Meals continued to receive the relevant food vouchers during the elongated summer vacation period. This ‘COVID Summer Food Fund‘ was eventually set up at an estimated cost of £120m, less than a quarter of the cost of Sunak’s ‘Eat out to help out’ scheme, a.k.a. the ‘summer eating allowance.’

In the longer term, when the reality of tax rises and/or spending cuts to pay for the COIVD-19 bailout begins to bite, the government needs to focus on intergenerational fairness and ensure that well off pensioners pay their share of the nation’s debt. It is time that a government made non-poor over-60s purchase their medication via a Prescription Prepayment Certificate (PPC), which in 2020-21 costs younger adults £29.65 for 3 months or £105.90 for 12 months, sums well within the reach of people in receipt of private and state pension payments. It is also time to make employees aged 65-plus pay a tax of the same rate as the employee National Insurance Contributions paid by younger workers, in order for older workers to fully contribute to the funding of the public services that they use more extensively than their younger colleagues. Such moves to cut the benefits received by, and increase the tax taken from, healthy, active people in their 60s and 70s would help to increase the funding of the social care services that are largely used by people aged 80-plus who are no longer able to undertake paid work and are entitled to face lower user charges for the social care that they require to ensure a degree of dignity and independence in old age.