We all know from personal experience that social services are in dire need of reform.
My family has experienced the high cost of nursing homes over the years as well as the shortcomings of family social services.
The bravery and kindness of the individual carers we’ve met has been nothing short of heroic. However, the way they operate is extremely dysfunctional.
No one wants to see hard-won personal savings or family homes snatched away in someone’s final years to meet the crippling cost of essential care. Mail continues to campaign for better solutions.
Bold
We were delighted when the Government fulfilled its promise of social care reform in the form a 1.25 percent increase to the National Insurance Contribution, which was a long-standing commitment.
The announcement involved one the most significant personal tax increases of modern times. It was high-risk. It felt bold and a strong solution to a complex problem back in September.
Since then, however, economic conditions are not as they used to be. The only reasonable response is to eliminate the tax hike.
Indeed, last night, Britain’s leading and respected economic think tank — the Institute for Fiscal Studies (IFS)— backed a delay of the increase for at least a year.
Since Chancellor Rishi Sunak introduced the Health and Social Care Levy in his September Budget, it has become something of an albatross around the Government’s neck. With the nation in the grips a crisis of cost-of-living, it is no surprise that the April tax increase could be worse.
‘No one wants to see hard-won personal savings or family homes snatched away in someone’s final years to meet the crippling cost of essential care. Mail tirelessly advocates for a better solution.
The levy, which will raise £12 billion a year over the next three years, will impose an average bill of £600 a year on ordinary working families — families already feeling the pinch as inflation takes hold.
But the most frustrating aspect of the NI hike is that the new funding it provides won’t make the slightest difference to the provision of social care in the short term.
It will initially be used as a pre-pandemic stimulus for an appallingly managed, but well-resourced, NHS. After that, the money will shift to social assistance.
What ministers failed to allow for — or rather badly misjudged — when they unveiled this levy was the savage impact of the pandemic on global supplies of goods and services, and the cost of energy in particular.
As a result, the new tax was due to be applied at the peak of the cost-of-living crisis, creating severe problems for businesses, individuals, and families.
Politicans clearly failed to notice the surge in consumer prices that reached a record high of 5.4 percent in December (and could reach 7 percentage points by spring).
As recently as November, the Governor of the Bank of England, Andrew Bailey — the person charged with combating inflation — described the post-Covid jump in prices as ‘transitory’.
Bailey made a U-turn last month when prices rose around the world. He raised the extremely low official bank interest rate from 0.1 percent to 0.25 percent and increased mortgage costs for homeowners.
Inflationary pressures have been exacerbated by spiralling energy costs.
They have been caused by factors largely beyond the Government’s control and, going forward, will be governed by global events such as how the terrifying military stand-off over Ukraine pans out. These increases have also had an indirect effect on household budgets in terms of higher production costs for basic items like food, clothing and other necessities.
Until now, the rise in the cost of fuel hasn’t been felt in personal energy bills. But come April — the same month the NI hike will kick in — the price cap is due to be revised, with gas and electricity bills for some 11 million households set to rise, potentially to more than £2,000 over a full year.
The impact will be punishing, with hard-pressed families and pensioners already agonising over impossible decisions, such as the ‘heat or eat’ dilemma: choosing whether to warm your home or feed your family.
Governments have a duty to respond in times of national emergency.
Spiralling
Boris Johnson, the Chancellor, and others showed steely resolve to stop irreparable harm to companies and jobs at the beginning of the pandemic. They used the furlough program, guaranteed loans to individuals and businesses in distress, as well as tax reductions for the hospitality industry.
To avoid double the damage of spiralling household expenses and higher inflation, they must also do so to avoid the tax increase in April. They risk ruining the economic protection efforts made throughout this pandemic.
The inflation and energy price shock may be beyond Whitehall and the Bank of England’s immediate control; but an artificially imposed tax hike can be spiked.
While cost of living increases are a factor, the public finances will still be in trouble due to unprecedented spending. The Treasury initially considered a levy on employers’ contributions of one per cent to fund social care, but Chancellor Rishi Sunak went far beyond that with the 1.25 per cent surcharge on employers and employees. This is a tax on work and jobs.
It was designed, naturally, to reduce the enormous Covid-induced Budget deficit and to meet the NHS’s needs.
Despite the Government’s efforts to stabilize the national debt it is important to remember that the level of stability is far below what it was during wartime.
There was a lot of waste
With the recovery of many industries, borrowing has fallen sharply. There are also plenty of buyers who will buy UK Government Gilts, which are bonds issued by the government to finance public spending.
This means that ministers can roll back tax increases, even though it requires a temporary mini-finance bill in order to determine how funding is distributed.
The idea that the NHS desperately needs this new funding must be challenged. Anyone who has had any experience in healthcare can attest to the massive waste of resources.
Office for National Statistics released new data showing that efficiency within the NHS has been declining even prior to the pandemic. In fact, productivity fell by 1.9 percent in the fiscal year ended in April 2020.
There’s a huge opportunity to improve performance without any new money.
Make no mistake, the tax increase proposed will have a catastrophic impact on the entire economy.
As we rebound from Covid, it is expected that the UK will be one of the most rapidly growing G7 economies.
A swingeing tax increase this spring, on top of the looming inflation threat, would derail the nation’s progress and, in the process, punish individual families.