MPs set to approve eye-watering £12bn tax raid for NHS and social care TODAY

MPs are set to approve the eye-watering £12billion tax raid for the NHS and social care today after a Tory revolt melted away.

The Commons is expected to rubber-stamp Boris Johnson's extraordinary national insurance hike - which pushes the tax burden to the highest in peacetime - in a vote later.

Health Secretary Sajid Javid was bullish about the move in interviews this morning, arguing that smashing the Conservative manifesto promise was the 'responsible' thing to do in the wake of the pandemic.

But he also admitted that the huge sums - including £30billion going into the NHS over the next three years - might not be enough to clear waiting lists. Health service bosses have already signalled they want more money, with calls for pay rises for staff.

There are claims that three Cabinet ministers challenged Mr Johnson privately over the tax rises yesterday, but there appears to be no appetite for an open rebellion - in part because the PM has been threatening a reshuffle. 

In return for the big tax rise - more than £1,000 a year for some higher earners - Mr Johnson has pledged that no individual will have to pay more than £86,000 for social care after October 2023. 

But there are major doubts about whether the reforms of the system will achieve, as well as fears that the NHS will simple swallow up all the funding and then demand more. 

The health service will receive the vast majority of the £36billion raised by yesterday's National Insurance hike over the next three years, with social care receiving a £5.3billion slice.

But health bosses said the settlement leaves a 'significant shortfall' and warned millions of patients will still face long delays. 

Mr Javid refused to give a categorical assurance that the new cash will clear waiting lists and fund social care. He said 'I think this is enough money' but added: 'The NHS is the biggest universal health service in the world, it's always had challenges for as long as I can remember.'

Asked if the money would tackle the backlog, Mr Javid said: 'No responsible health secretary can make that kind of guarantee.'

He added: 'What I can be absolutely certain of is that this will massively reduce the waiting list from where it would otherwise have been.'

Mr Javid told BBC Breakfast that the controversial policy was 'the act of a responsible and serious government'.

'As Health and Social Care Secretary, I can certainly point to the huge challenges – fair to say the biggest challenges in our lifetime – that the NHS and social care have faced.

'As a government you can either stand back and leave it as 'business as usual', or you can address it and help tackle these challenges.'

Faced with the crisis, Mr Javid said ministers could have chosen to 'doggedly' stick to the manifesto promise not to raise taxes and allowed waiting lists to rise to 13 million.

'Or we can just confront the problem, be honest with the British people, take the difficult decision and say 'yes, we have broken a manifesto promise, but we also didn't know there was going to be a global pandemic and we are going to tackle that waiting list because we have also promised to you that the NHS will always be there for you, world-class service, free at the point of use, there for everyone'.'

The NHS Confederation and NHS Providers, which represents hospitals and health organisations, claimed the package would still leave a funding gap of around £3.5billion a year for frontline services in England. 

Tax experts warned pouring the money into the bottomless pit of the NHS was likely to just lead to more demands for money in the future.

John O'Connell, chief executive of the TaxPayers' Alliance, said yesterday's news was just 'laying the groundwork for more demands for cash'.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: 'This announcement clobbers workers and investors, and is unlikely to be the end of the bad news.

'We don't yet know what it has up its sleeve, but we do know the tax environment for savers and investors is unlikely to get more generous in the near future.'

The Prime Minister promised the huge cash injection would help the NHS get 'back on its feet', with the money funding nine million extra operations and checks before the next general election.

He admitted waiting lists would 'get worse before they get better', but insisted that the catch-up programme funded by the new health levy would be the biggest in NHS history.

And he declared that in three years' time, the service would aim to treat around 30 per cent more elective patients than before the pandemic.

Ministers have also promised NHS reform and investment in new technology to ensure the money is not wasted – and have promised they will push the health service to '110 per cent capacity'.

Referring to the cash being used to tackle the elective backlog, Mr Johnson told a Downing Street press conference on Tuesday: 'This is fundamental to putting our NHS back on its feet post-Covid.'

However in their joint statement The NHS Confederation and NHS Providers said: 'NHS leaders have unfortunately become accustomed to having less money than the service needs.

'But the size of the funding gap remains daunting and will significantly impact the kind of care that the NHS can provide to the public in the months and years ahead.'

The statement raises fears the vast majority of the money raised by the new health and social care levy will end up being swallowed up by the NHS.

But Chancellor Rishi Sunak said: 'Properly funded, we can tackle not just the NHS backlog and expand the social care safety net, we can afford the nurses' pay rise, invest in the newest, most modern equipment, prepare for the next pandemic, and provide one of the largest investments ever to upskill social care workers.

'In other words, we can build the modern, more efficient health and social care services the British public deserves.'

And Health Secretary Sajid Javid said the Government would 'ensure that the vital work of routine operations – things like hip replacements, cataract surgery – never stops'.

The number of patients waiting for elective surgery and routine treatment in England is now at a record high of 5.5million. The number is estimated to reach 13million by the end of the year without action.

The Government's plan for health and social care states the extra cash 'could deliver the equivalent of around nine million more checks, scans and procedures'.

Furious business leaders slammed Boris Johnson's pledge-breaking £12billion national insurance raid as a 'kick in the teeth' for Covid-hit firms - as the Prime Minister admitted he cannot rule out even more hikes.

Finally revealing his vision for social care in England, he said reform can no longer be 'ducked' and the elderly should not lose their life savings and homes due to the 'bolt from the blue' of dementia.

At a press conference alongside the Chancellor and Health Secretary, Mr Johnson argued that one in seven people now faced care costs of more than £100,000 and wider society needs to 'share the risk'.  

'Everyone knows in their bones... we can't now shirk the challenge of putting the NHS back on its feet,' he said.

Rishi Sunak insisted: 'This is a permanent new role for the government. And as such we need a permanent new way to fund it.' 

Business leaders reacted with fury, saying the move will 'dampen the entrepreneurial spirit needed to drive the recovery'.

Economists also warned it risked damaging the City of London by deterring investors and punishing entrepreneurs as Britain battles New York and Brussels on its way out of the pandemic.

Head of tax at EY Chris Sanger told the Telegraph: 'You're effectively now increasing the cost of owning shares, and that will go well beyond people who are actually earning money to those that are actually investing and providing the capital which is the lifeblood of industry.

'Effectively you've increased the cost of capital to a whole series of businesses which are looking to grow the economy.

'Through measures to try and address a failing in our system that means that people who are earning money can receive funds outside of national insurance, you end up imposing a tax on entrepreneurs' capital.'

According to the TaxPayers' Alliance, it means the overall tax burden will reach the equivalent of more than 35 per cent of Gross Domestic Product (GDP), its highest ever sustained level. It has only ever been higher during very short term fluctuations in financial policy.

The Institute for Fiscal Studies said yesterday's 1.25 percentage-point rise in national insurance for 25million people, together with other tax rises already announced, would take the tax burden to its highest ever sustained level.

It might have been higher in 1969 and it was higher in the late 1940s. But apart from these short-term fluctuations, it is the highest on record.

The IFS also said that the announcements meant government spending would come out of the Covid crisis at 42.4 per cent of national income – higher than before the pandemic and a record level in peacetime.

Isabel Stockton, a research economist at the IFS, said: 'Following just six months after the March budget, itself the biggest tax-raising budget since Norman Lamont's 1993 spring budget, today's announcements push taxes to their highest-ever sustained share of the economy.

'Equivalently, government spending is set to reach a record peacetime level.

'Long-term challenges around rising costs of health and social care means this increase in the size of the state is likely here to stay.'

Ministers insisted the 1.25 per cent rise in national insurance – which will be dubbed a 'health and social care levy' – was much fairer than other tax rises because it falls on business as well as individuals.

To raise the equivalent amount in income tax would require an increase in individuals' tax of 2 per cent.

A typical basic rate taxpayer earning £24,100 will contribute £180 in extra NI in 2022/23, while a typical higher rate taxpayer earning £67,100 will contribute £715. For the first time, the NI will be charged on people working over the state pension age of 66.

But Tom Waters, a senior research economist at IFS, said that the changes continued a long-term trend of moving taxation from pensioners towards those in work. 'The overwhelming majority of the tax rise will fall on working-age individuals, a consequence of using national insurance rather than income tax to raise the revenue,' he said.

'This is the latest in a long line of reforms which have tilted the burden of taxation towards the earnings of working-age people and away from the incomes of pensioners.'

John O'Connell, chief executive of the TaxPayers' Alliance, said low-paid workers and struggling employers will be hit hard – 'laying the groundwork for more demands for cash'.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said further tax hikes could be on the horizon.

'We knew the government was going to be hiking taxes to claw back as much money as possible after spending record peacetime sums propping up the economy during the pandemic, and this marks the first wave of bad news,' she said.

'This announcement clobbers workers and investors, and is unlikely to be the end of the bad news.

'We don't yet know what it has up its sleeve, but we do know the tax environment for savers and investors is unlikely to get more generous in the near future.'

Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown, said: 'The number of people who continue to work past state pension age has grown hugely in recent years with approximately 1.28million currently in work.

'This reflects increasing longevity and the fact that many people continue to work because they want to. It makes sense that this group also contributes to this levy.'     

The respected IFS think-tank said the changes added to a 'huge year for tax rises' following the March Budget, with the tax burden on course to reach its highest-ever sustained level during peacetime.  

Extraordinarily, Mr Johnson said he was unable to give a firm commitment taxes will not have to be increased further. 'I certainly don't want any more tax rises this parliament,' he said after being repeatedly challenged on the issue, stressing that fiscal changes were a matter for the Chancellor.

From October 2023 no-one should have to pay more than £86,000 for care over their lifetimes. Alongside the cap, there will be a 'floor' of £20,000 in assets, with anyone who has less than that not being required to contribute to costs. 

Lord Bilimoria, President of the Confederation of British Industry (CBI), said that although there is 'genuine consensus' that social care reforms and greater investment are long overdue, businesses 'are already set to be hit by a substantial rise in corporation tax in 2023'. 

He added: 'National Insurance increase will directly hurt a business's ability to hire staff, at a time when businesses have faced a torrid 18 months and are now fighting crippling labour shortages. Government must be wary of heaping further pressure on businesses who will be central to the recovery, particularly by making it more expensive to recruit.

'This autumn will be a critical period if we are to drive a sustainable recovery. The Government must use all the levers it has in its power to encourage more businesses to invest in the months to come and do everything it can to encourage growth.' 

The boss of manufacturing trade group Make UK said the new social care tax's introduction was 'ill-timed as well as illogical'. Stephen Phipson said that 'firms need capital to reset', and told the BBC: 'After witnessing large scale redundancies at the height of the pandemic and the plug being pulled on the furlough scheme, government should be putting in place measures to protect jobs and incentivise recruitment.' 

Suren Thiru, head of economics at the British Chambers of Commerce, said: 'This rise will impact the wider economic recovery by landing significant costs on firms when they are already facing a raft of new cost pressures and dampen the entrepreneurial spirit needed to drive the recovery.'

Director of the Institute for Fiscal Studies (IFS) Paul Johnson told the BBC's World at One programme a National Insurance increase was 'not the right' way to pay for social care reforms. He added: 'We always knew we were going to need tax rises during this decade to pay for health and social care. 

'This is not the right tax rise - income tax would be better, some other ones would have been better.

'If you had to do something with income tax, National Insurance or VAT, it would have been better if it had been something which impacted all generations similarly, it would be better if it affected people with rental income and so on.'

There was also grumbling from the Tory benches, with MPs demanding to know if Mr Johnson still believed in 'low taxes' and warning that the NHS will simply suck up the extra money without making genuine improvements. 

Business chiefs have responded with anger to the plans, with the British Chambers of Commerce warning increasing national insurance contributions 'will be a drag anchor on jobs growth at an absolutely crucial time' while the CBI said 'now is not the time for tax increases'.

Just £5.3billion of the £36billion of revenue raised in the next three years is expected to go to social care, with the rest earmarked for a huge 'catch up programme' to stabilise the NHS after the pandemic.       

Critics have slammed the policy, pointing out that younger workers will be disproportionately affected by the hike, effectively subsidising care for sometimes-wealthy older people. 

Mr Javid said he could not specify how the funding will break down between the NHS and social care after three years as there are too many 'assumptions'.  

Social care chiefs welcomed the moves, but warned they will not be enough to tackle the problems being driven by the aging population and staffing shortages. And a snap Savanta ComRes poll suggested the public is split almost down the middle over whether it was right for the PM to breach the manifesto, with 46  per cent saying it is acceptable and 42 per cent the opposite. 

From October 2023 no-one should have to pay more than £86,000 for care over their lifetimes. 

Alongside the cap, there will be a 'floor' of £20,000 in assets, with anyone who has less than that not being required to contribute to costs. 

Between that and £100,000 in assets people will be asked to pay part of the bill. 

Mr Johnson said it would be 'irresponsible' to pay for the overhaul from borrowing and he had to make 'difficult' decision. The PM openly admitted that he was breaking a manifesto commitment not to raise NI, but swiped: 'A global pandemic was in no-one's manifesto.' 

He said the money will not go to 'middle management'. 'It will go straight to the front line,' he insisted. 

The Cabinet agreed the controversial package at its first face-to-face meeting since the summer break. Despite disquiet among ministers and on the Tory benches, there seems little appetite for a major revolt in a vote slated to happen tomorrow.

National insurance will be hiked on 25million workers and millions of firms, in a move that will cost employees on £30,000 a year an extra £255 a year in tax. A typical higher rate earner on £67,100 faces paying £715 more annually. Dividend income will also be subject to an extra 1.25 percentage point levy to ensure the charge cannot be dodged.

From April 2023 the NI increase will be reversed and a health and social care levy will be legally introduced - at which point pensioners who are still earning will also need to pay it. People will still need to contribute to 'room and board' costs when living in a residential home. 

Mr Johnson dismissed complaints about the fairness of using the NI system, saying that the highest earning 14 per cent will pay half the extra. The majority of small businesses will not face an extra burden due to tax reliefs, he added.   

Conservative former leaders Lord Hague and Iain Duncan Smith have joined a welter a criticism of the upheaval, saying that the public will not forget the 'defining moment' of the 2019 manifesto being effectively torn up. 

Mr Duncan Smith said the policy, key elements of which are still unclear, looked like a 'sham' that will not fix the problems with social care.

Sir Keir Starmer said a tax on wealth aimed at 'those with the broadest shoulders' should be used to pay for an improved social care system. 

In a second move, ministers are also breaking their manifesto pledge to keep the state pension 'triple lock'. It will be suspended for a year, with pensioners given around 2.5 per cent, rather than the 8 per cent rise they would have received.  

The IFS' Paul Johnson said the dual nature of National Insurance contributions meant the tax hike amounted to double the 1.25 per cent announced.

Speaking to BBC Radio 4's World At One programme, Mr Johnson said: 'We keep saying 1.25 per cent – it is really 2.5 per cent.

'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 2.5 per cent tax rise on earnings.'

He added: 'This is £12billion on top of £25billion of tax rises in the Budget – this must be the biggest tax rising year in many decades.'

Admitting that tax pledge had been scrapped, Mr Johnson said: 'No Conservative government ever wants to raise taxes and I will be honest with the House, yes, 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 and I think the people of this country understands that in their bones and they can see the enormous steps this Government and the Treasury have taken.

'After all the extraordinary actions that have been taken to protect lives and livelihoods over the last 18 months, this is the right, the reasonable and the fair approach.'

He told the press conference this evening that the government had to 'take a judgment, make a choice, about what I think is the higher priority', indicating fixing the social care system had also been a manifesto pledge.

'I think that what the people of this country will want after what we've all been through is honesty and fairness and rationality about the situation.'

He said that meant not leaving 'the burden to mount up for future generations'.

Mr Sunak said he felt 'people recognise we're grappling with difficult times'.

Scotland, Wales and Northern Ireland will receive an additional £2.2 billion in additional health and social care spending from the levy. 

Downing Street will be pleased that the Tory response to the plan in the Commons was muted. 

Backbencher Huw Merriman asked the PM why he decided to 'reject other forms of insurance as a model' to fund social care.

He told MPs: 'The Germans brought in an insurance model back in the '80s, facing the same problems that we had. It relies on the private insurance sector and (Conservative peer) Lord Lilley has brought forward a Bill which would see the Government set up a state insurer.

'Those retired householders would then pay a premium, which would be a fixed charge and then that charge would only be paid upon the debt of that individual. Don't those models do a little more to intergenerational fairness?'

The Prime Minister insisted his Government 'looked at all those models', adding: 'I think the problem is that we need to go for an insurance system that it works and has a genuine chance of being set up.

'The only way of encouraging the financial services industry to come in and offer products is to take away that risk of catastrophic cost. And that is too much of a substantial risk for too many people and it means the insurance market hasn't been able to develop.

'We believe this is the best way forward for the country.'

Former cabinet minister Damian Green asked: 'Can (he) guarantee that the social care sector will itself see a significant uplift in its support in the immediate future?'

He said: 'There's been much debate about how the money's being raised, but I think of more concern is how the money is going to be spent. My fear is that once you start spending on perfectly proper things like the NHS backlog, there will never come a point where there's enough money in this new fund to be transferred to social care that needs it now. You can't spend the same pound twice.'

Mr Johnson replied: 'The investments in social care will be protected by the Government and by the Treasury.'

He added later: 'I don't think anyone wants to see money just bundled into the NHS without reform.' 

Another backbencher, Richard Drax, said: 'As Conservatives, broken pledges and tax rises should concern us. Our finances are in a perilous state. Surely a radical review of the NHS is needed if this money is not to go and disappear into another blackhole?

'Does my right honourable friend agree with me that the Conservative way to raise revenue is to lower taxes not raise them?'

The Prime Minister responded: 'I do agree with that general proposition.

'But in the current circumstances after 18 months in which it has been necessary for the Government to perform the most enormous fiscal exertions to put its arms around the country at a very, very difficult and dangerous time, I think it is right that we take the steps that we are to put the NHS back on a sustainable footing and to deal with the problems of social care which make long-term solutions for the NHS - the very reform that he and I want to see - so difficult to achieve.'

Former health secretary Jeremy Hunt said a rebellion large enough to defeat the Government was unlikely.

'I can't really imagine any backbenchers wanting to turn round to their own constituents and say they tried to vote down extra money for the NHS and care system,' he told the BBC.

Sir Keir said Mr Johnson had announced 'a tax rise on young people, supermarket workers and nurses, a tax rise that means a landlord renting out dozens of properties won't pay a penny more but the tenants working in full-time jobs would, a tax rise that places another burden on business just as they are trying to get back on their feet'.

'Read my lips: the Tories can never again claim to be the party of low tax,' he added.

Vaccines minister Nadhim Zahawi squirmed as he was challenged on the proposals in a round of interviews this morning, admitting he is not 'comfortable' with the idea of flouting manifesto commitments. 

Downing Street said the PM told Cabinet that a 'new plan is needed' to address the issues with the NHS and social care. Mr Johnson's spokesman said the mood during the hour-long session was 'positive' and there was 'agreement that this is an issue that needs to be tackled'.

The tax rise of 1.25 percentage points shatters the solemn Tory 2019 election vow not to raise national insurance.  

Downing Street has dubbed as 'unfair and often catastrophic' the situation where someone who has dementia may have to pay for their care in full, while someone cared for by the NHS would receive care for free.

It said one in seven people now pays more than £100,000 for their care, and said the system can lead to 'spiralling costs and the complete liquidation of someone's assets'.

Under current arrangements, anyone with assets over £23,350 pays for their care in full, but No 10 said the costs were 'catastrophic and often unpredictable'.

Cash will be poured into the NHS to allow it to operate at 110 per cent of capacity to help it start clearing a waiting list that has soared to more than five million during the pandemic and is on course to hit 13million by the end of this year.

The NHS will also be ordered to undergo a major efficiency drive. Ministers hope the money will clear the waiting list backlog by the time of the next election.

Mr Johnson said: 'We must now help the NHS to recover to be able to provide this much-needed care to our constituents and the people we love. We must provide the funding to do so now.

'We not only have to pay for the operations and treatments that people decided not to have during the pandemic, we need to pay good wages for the 50,000 nurses who have enabled that treatment and who can help us tackle waiting lists that could otherwise expand to 13 million over the next few years.'

Mr Johnson said: 'Having spent £407 billion 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. 

'From next April, we will create a new UK-wide 1.25 per cent 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.'

The proceeds of the tax rise of 1.25 percentage points will then be used to fund a new cap of £86,000 on the cost of social care, reducing the risk that people will have to sell their homes to pay for help.

Assets below £100,000 will be at least partially protected from the state – a huge increase on the current system in which people have to fund all their care costs if they have assets of more than just £23,350.

Tory MPs and health experts have warned there is a danger that the entire sum will be swallowed by the NHS, leaving nothing for social care. 

The concern is said to be shared by Mr Sunak, who has sought guarantees he will not be asked for more money for the sector in future.

However, Sally Warren, ex-director for social care at the Department of Health and now with the King's Fund think tank, said there was still a 'big worry' the NHS will keep the funding. 

She told The Telegraph: 'We think this is going to take many, many years. There are lots of uncertainties, but it could take around five to seven years.

'This is not something that will disappear in a year or two if the NHS just works faster - staff are already at risk of burnout.

'Our big worry is if the NHS gets all or most of the money for the first three years, social care just can't wait for that long. And is it realistic to think the NHS will simply hand back money which will be paying for more staff ? That is not realistic.'

Mike Padgham, chairman of the Independent Care Group, has said he is 'disappointed' with the Government's plan for social care reform, telling Good Morning Britain he has concerns over the pace of the funding.

Mr Padgham said: 'I'm disappointed that the vast majority of the money that's been allocated seems to be going to

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