PM may bring in tax hike to pay for social care reforms
BORIS JOHNSON will have to break his tax-lock pledge to fund social care reform if he insists on his “incredibly expensive” preferred option, Government sources have warned.
The Conservatives made a manifesto vow at the 2019 general election that ruled out increases to income tax, national insurance contributions and VAT. However, the Prime Minister is coming under mounting pressure within Government to hike taxes if he presses ahead with the so-called Dilnot proposals to reform social care.
Reforming social care was another manifesto pledge and Mr Johnson faces growing clamour to bring forward a plan. He met Rishi Sunak, the Chancellor, last month to explore options.
The Prime Minister yesterday declined to confirm whether legislation on the issue will be announced in the Queen’s Speech next Tuesday, but it is understood he intends to bring forward a blueprint by the end of this year.
He is said to favour proposals first advanced a decade ago for a cap on lifetime care costs for individuals, with the state covering the rest. Sir Andrew Dilnot, the social care expert behind the recommendation, suggested setting the cap at between £25,000 and £50,000, but other thresholds have been floated.
Sir Andrew’s 2011 report also recommended increasing the “floor” – or asset threshold – below which people would receive means-tested state support towards the cost of their care from the current level of £23,250 to £100,000.
However, Treasury officials are said to be resisting the plans amid fears over the costs, which could range from £2 billion to £10 billion annually, depending on the levels at which the cap and floor are set.
Matt Hancock, the Health Secretary, also warned that “any solution also needs to consider the financial impact on taxpayers as a whole” when he wrote to MPS and peers last spring urging them to help secure a cross-party consensus on long-awaited reform.
A senior Government source told The Daily Telegraph: “The Dilnot reform is, at the moment, the front-runner in the Prime Minister’s mind about what he wants to do. The levers you have to pull in terms of paying for it are things that involve breaking the tax-lock promise we made, because it is so expensive … incredibly expensive.” The source added: “Where the disagreement is, is you can’t just spend money and not find it in other areas. The thing the PM needs to decide is whether he’s prepared to pull some levers to pay for it or not.”
A second Whitehall source said: “Clearly there are tensions in terms of who pays [for social care]. It [social care reform] was in our manifesto and I still think that the principle of a cap and a floor for people is where most people in Government are at.”
Downing Street insiders last night said a range of options for overhauling social care were still being considered, adding: “No decision has been made.”
It comes after The Daily Telegraph revealed yesterday that senior Conservative MPS and Treasury officials have raised alarm that the long-awaited reforms risk skewing state support towards those in the South of England.
The Department for Health has conducted modelling of the Dilnot reforms which suggested that a cap of £50,000, while helping up to 200,000 people over 65 in care this year, would “disproportionately” benefit the wealthy. People in the South East would be on average just under £400 better off than those in the North East, it found.
Yesterday, Sir Andrew said that tax rises may be needed to pay for the reforms, telling BBC Radio 4’s Today programme: “It’s important to think about how the money to pay for this should be raised. I think it’s perfectly reasonable that some of the money that is needed to pay for it should come from possibly tax increases and those tax increases could perfectly reasonably affect older as well as younger people.”