UK PM Johnson raises taxes to tackle health and social care crisis

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© Reuters. A woman on a mobility scooter drives past a mural praising the NHS (National Health Service) amidst the continuation of the coronavirus disease (COVID-19) pandemic, London, Britain, March 5, 2021. REUTERS/Toby Melville

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By Elizabeth Piper, Kylie MacLellan and William James

LONDON (Reuters) – British Prime Minister Boris Johnson set out plans on Tuesday to raise taxes on workers, employers and some investors to try to fix a health and social care funding crisis, angering some in his governing party by breaking an election promise.

After spending huge amounts of money to fight the COVID-19 pandemic, Johnson is returning to an early pledge to address Britain’s creaking social care system, where costs are projected to double as the population ages over the next two decades.

He also moved to try to tackle a backlog in Britain’s health system, which has seen millions waiting months for treatment from the state-run National Health Service, after resources were refocused to deal with those suffering from the coronavirus.

“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,” Johnson told parliament.

“It would be irresponsible to meet the costs from higher borrowing and higher debt,” he said, outlining tax increases that broke a promise made in the Conservative Party’s election manifesto not to increase such levies to fund social care.

British politicians have tried for years to find a way to pay for social care, though successive Conservative and Labour prime ministers have ducked the issue because they feared it would anger voters and their own parties.

Ignoring loud disquiet in his party, Johnson outlined what he described as a new health and social care levy that will see the rate of National Insurance payroll taxes paid by both workers and employers rise by 1.25 percentage points, with the same increase also applied to the tax on shareholder dividends.

He said the increases would raise 36 billion pounds ($50 billion) over three years.

Johnson has tried to cool anger within his Conservative Party, for decades seen as a defender of low taxes, over the hikes, which several lawmakers fear could lose them support at the next election, due to take place in 2024.

He explained that elderly Britons would no longer face crippling costs that have forced many to sell their homes to pay for their care, and said he could never have predicted the coronavirus pandemic which has further stretched services.

“You can’t fix health and social care without long term reform. The plan I’m setting out today will fix all of those problems together,” he said, to jeers and laughter from opposition Labour Party lawmakers.

“I accept that this breaks a manifesto commitment which is not something I do lightly, but a global pandemic was in no one’s manifesto.”

NO MORE LOW TAX CONSERVATIVES

Labour leader Keir Starmer was quick to pounce on the fears which have swept through the Conservatives since snippets of the new policy found their way into the media.

“This is a tax rise that breaks a promise that the prime minister made at the last election … Read my lips, the Tories (Conservatives) can never again claim to be the party of low tax,” Starmer said.

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

For Johnson, who helped win the 2016 Brexit vote and then as prime minister presided over Britain’s exit from the EU, fixing social care “once and for all” offers a possible way to broaden his domestic legacy.

In 2019, Johnson said he had a plan for social care and promised to prevent the elderly having to sell their houses to pay for care. But his proposals are a gamble.

Critics say Johnson is expanding state spending yet again without any clear reform of the way social care is administered, and that the rise in National Insurance payments will disproportionately hit the young people and lower paid workers.

The alternatives to raising national insurance are increasing income tax or imposing a wealth tax of some kind.

Under the current care system, anyone with assets over 23,350 pounds ($32,305) pays for their care in full. This can lead to spiralling costs and the complete liquidation of someone’s assets.

Johnson said from April 2023, no one would have to pay more than 86,000 pounds towards the cost of care over their lifetime.

Those with assets under 20,000 pounds will have their care costs fully covered by the state, while those with between 20,000 and 100,000 pounds of assets will receive means-tested state support.

“The reality of reduced take home pay to deal with a problem out of sight of most people will be unwelcome when it bites,” said William Hague, a former Conservative Party leader.

($1 = 0.7261 pounds)

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