Prime Minister raises national insurance to begin UK's 'biggest catch up programme'
- Credit: Archant
The Prime Minister has announced the Government will begin the “biggest catch up programme” in the health service’s history by breaking a manifesto pledge and hiking national insurance payments.
Boris Johnson has announced a new UK-wide "health and social care levy" to address the funding crisis in the sector.
The tax will begin as a 1.25 per cent rise in National Insurance from April 2022, and will be a separate tax on earned income from 2023.
Mr Johnson said: “Having spent £407billion or more to support lives and livelihoods throughout the pandemic from furlough to vaccines, it would be wrong for me to say that we can pay for this recovery without taking the difficult but responsible decisions about how we finance it.
“As a permanent additional investment in health and social care it would be irresponsible to meet the costs from higher borrowing and higher debt.
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"From next April, we will create a new UK-wide 1.25pc health and social care levy on earned income hypothecated in law to health and social care with dividend rates increasing by the same amount.
“This will raise almost £36billion over the next three years, with money from the levy going directly to health and social care across the whole of our UK.”
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National Insurance is rising by 1.25 percentage points from 12pc to 13.25pc of earnings.
Its rise in percentage terms is just over 10pc or a 10pc tax hike.
The tax rise means that anyone earning £20,000 will pay an extra £130 to a total £1,381 a year, while those on £30,000 will pay an extra £255 to £2,706.
Those earning £100,000 will pay £7,008 annually with the additional £1,130 rise.
The plans, agreed with Cabinet earlier, place a cap on the amount individuals spend on their care.
From October 2023, no one starting care in England will be forced to spend more than £86,000 over their lifetime.
Anyone with assets of less than £20,000 will have their care costs fully covered by the state, while those with less than £100,000 will see their costs subsidised.
Paul Johnson, director of the Institute for Fiscal Studies (IFS) said the dual nature of National Insurance contributions meant Boris Johnson’s tax hike amounted to double the 1.25pc announced.
Speaking to BBC Radio 4’s World At One programme, Mr Johnson said: “We keep saying 1.25pc – it is really 2.5pc.
“It is one-and-a-quarter from the employer on every £100 you earn, it is one-and-a-quarter from the employee – you add that up and it is two-and-a-half per cent.
“It is really a 2.5pc tax rise on earnings.”
He added: “This is £12 billion on top of £25 billion of tax rises in the Budget – this must be the biggest tax rising year in many decades.”
Additional reporting by PA