Opinion: National Insurance hike not the answer to social care crisis

A National Insurance rise is essentially a jobs tax and unfairly punishes the young, argues John Fitzsimons.

Back when Boris Johnson became Prime Minister two years ago, he declared that he had a plan to resolve the social care crisis ready to go.

Not for the first time though, the truth doesn’t quite marry up with what came out of his mouth.

Indeed, details about this promised plan have once again been delayed until after Parliament returns from the summer recess, on account of the PM, Chancellor Rishi Sunak and Health Secretary Sajid Javid all being in isolation after Javid caught Covid.

That hasn’t stopped leaks emerging though about what that plan is likely to consist of, namely a 1% increase to National Insurance.

The social care funding crisis

It’s important at this point to emphasise just how serious the social care crisis is. 

Analysis from the Health Foundation earlier this year, outlining a handful of different scenarios for improving access to care over the next decade, suggested that anything from £6.1 billion to £14.4 billion is needed. 

That’s not exactly a small sum of money and looks even more imposing when you consider the money the Government has already spent over the last year and a half helping to keep the nation moving during the worst of the pandemic.

Can it wait?

Let’s be honest, there’s no easy answer when it comes to funding social care. The reason it’s such a big problem right now is that actually addressing where the funding should come from has been put off, over and over again, year after year.

As a child, my mum would say that I would always put off anything I could until it couldn’t be avoided any longer, and it’s a similar tactic that’s been adopted by the authorities on social care. 

However, the worst things that I was putting off were my homework or cleaning my football boots ‒ it wasn’t coming up with a fair way to pay for social care.

Yet while there’s no easy answer, there are clearly some answers that are less acceptable than others. And an increase in National Insurance is a perfect example of such an iffy answer.

Why a National Insurance hike isn’t the answer

The problem with hiking National Insurance is that, yet again, it leaves younger people to fit the bill.

Let’s remember that once you hit State Pension age, you stop paying National Insurance, no matter whether you’re still working or enjoying a beefy pension.

It’s a tax that’s only paid by younger people. In other words, the closer you are to needing to actually make use of social care, the less likely you are to have to contribute towards the funding of it through this plan.

To be fair, it’s debatable how much more would be raised if the National Insurance exemption was removed for those above State Pension age.

However, it would at least be a step towards improving fairness.

I find it difficult to argue with Torsten Bell, chief executive of the Resolution Foundation, who suggested that a rise in National Insurance would be a terrible way to resolve the social care question given it asks younger and lower-paid workers to contribute more than older and wealthier people.

He added: “Why we would do that, having just lived through a pandemic that has increased wealth but hit young low earners hard, is a question to which no one has a good answer.”

It’s also relevant to note that, in the Conservative Party manifesto for the 2019 election, it pledged not to touch Income Tax, National Insurance or VAT during the term of this parliament. That makes the potential for cranking it up now even more difficult to stomach.

What can we afford to pay?

Alongside the tax hike, there will likely be the requirement for those of us who end up requiring social care to foot some of the bill. As such, there will almost certainly be a cap in place to limit how much we can pay as individuals.

Finding a fair level for that cap is easier said than done of course.

The argument goes that it’s unfair for those who have been sensible and saved throughout their working lives to see every penny disappear on care costs, compared to those who have not saved and so don’t have the money to devote towards those costs.

I certainly have some sympathy for that outlook.

But if we are to tackle this issue, we are going to have to have some uncomfortable conversations, particularly about property.

It’s impossible to avoid the fact that older people own an extraordinary amount of housing wealth.

A recent study by Key found that the property owned by over-65s, free of mortgages, is now worth more than £1.23 trillion, and has grown by 58% over the last decade.

Obviously, not all pensioners own their homes and it would be wrong to act as if they do.

But that’s a vast amount of wealth that a lot of older people are sitting on. And while I appreciate those homeowners will want to pass some of that wealth onto their loved ones when they pass away, some of that property wealth would go an awful long way towards helping cover those care costs.

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