UK PM Johnson to hike taxes to pay for elderly and disabled care

[September 07, 2021]  By Elizabeth Piper and Kylie MacLellan

LONDON (Reuters) - British Prime Minister Boris Johnson will on Tuesday set out a tax hike to pay for the soaring cost of caring for elderly and disabled people, a breach of election pledges that many in his party fear will expand the state at the expense of the young.

After splurging on the COVID-19 pandemic, Johnson is now trying to address Britain's creaking social care system, whose costs are projected to double as the population ages over the next two decades.

Politicians have been trying for years to find a way to pay for social care, though successive British prime ministers have ducked the issue because they feared it would anger voters and trigger rebellions within their own parties.

Johnson wants to raise the National Insurance (NI) tax paid by around 25 million working people to subsidise care for pensioners, including wealthy retirees. The elderly currently account for about half the social care bill, with other groups such as the disabled or mentally ill making up the rest.

The Sun newspaper reported that the package would also include a hike in taxes on shareholder profits.
 

Senior ministers in Johnson's cabinet approved his plans on Tuesday. Johnson is due to address parliament at around 1130 GMT. Johnson, his finance minister Rishi Sunak and health minister Sajid Javid will then hold a news conference.

"We must act now to ensure the health and care system has the long-term funding it needs to continue fighting COVID and start tackling the backlogs, and end the injustice of catastrophic costs for social care," Johnson will tell parliament, according to extracts released by his office.

"My government will not duck the tough decisions needed to get NHS (National Health Service) patients the treatment they need and to fix our broken social care system."

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 plan is a gamble.

Though Johnson won the biggest Conservative majority since Margaret Thatcher, many of the party's lawmakers worry his government lacks both a big-picture reform plan for the United Kingdom and the talent to implement one.

Britain's Prime Minister Boris Johnson addresses lawmakers about the withdrawal from Afghanistan, in London, Britain September 6, 2021. UK Parliament/Jessica Taylor/Handout via REUTERS

TAX RISE

Although the next national election is not due until 2024, many Conservatives say that raising taxes will hurt their positioning as the party of low taxation.

"A tax rise suggests ministers are increasingly conscious that the country cannot live on fantasy money. That, at least, is to be welcomed," said William Hague, a former Conservative Party leader.

"The reality of reduced take home pay to deal with a problem out of sight of most people will be unwelcome when it bites," Hague said, adding that fringe parties would benefit from the tax rise.

Critics say Johnson is expanding state spending yet again without any clear reform of the way social care is administered.

Johnson's office and the finance ministry have repeatedly refused to detail financing plans, but British media have reported that the prime minister wants to raise NI, paid by working people and employers.

Many Conservative lawmakers worry this will hurt younger, low-income workers and breach his 2019 election guarantee not to raise the tax.

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.

The Telegraph newspaper said lawmakers could face a snap vote on the social care plans later this week.
 

($1 = 0.7228 pounds)

(Reporting by James Davey; Editing by David Gregorio, Guy Faulconbridge and Catherine Evans)

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