Social care: tax hikes, broken promises and more pain to come

Boris Johnson appeared, on the surface at least, super-confident as parliament returned last week to tackle the vast backlog of challenges that Covid-19 has left piled high in ministerial in-trays across Whitehall.

On a visit to a care home in east London, the prime minister cheerfully clasped a mug saying Love Social Care before heading, full of energy and jokes, to the House of Commons to make a statement on how he proposed to fund the health and care systems out of the crises in which both are mired. But his characteristic ebullience hid a new determination in government, a new calculation.

The aim was to showcase a prime minister determined to govern, lead and finally tackle head-on the issue that his predecessors David Cameron and Theresa May, and Labour prime ministers before them, had ducked or messed up over previous decades. Politically that was one intended message, the other being that Keir Starmer and Labour still had no plan at all, so how could Her Majesty’s Opposition dare to criticise a government that had finally come forward with one? “This is Boris saying: I can make myself unpopular to get things done, even if that means breaking promises. The intention is to contrast strength and bravery versus weakness and dithering,” said a former Tory minister.

In advance, and after much pre-briefing, the idea of a manifesto-busting 1.25% rise in national insurance for every worker, to pay for a £12bn-a-year health and care levy – one that would take public spending to its highest ever level in peace time and mean a huge expansion of the size of the state – met with much dismay among the many Conservatives committed to low taxes and smaller government.

Many of the 2019 intake were among the most vocal critics. How, they worried, would this go down in areas where voters deserted Labour for the Tories, partly because they did not like Jeremy Corbyn’s high tax and spend agenda? How to defend the red wall now?

Dozens of Tory backbenchers threatened rebellion, and there was talk of splits in the cabinet. The Tory press seemed unsure whether to hail what it saw as a giant gamble with the nation’s finances, and the abandonment of Conservative principles, or to cry betrayal. The Daily Telegraph declared that Johnson had “opened a new front in the simmering civil war within the Tory party” while the Daily Mail implied his very future as prime minster rested on making it all work. “Now Make Care worth the Cost”, it said.

This was a week when it seemed that politics could be changing profoundly ahead of what promises to be a defining party conference season, as the consequences of living with Covid-19 for good, and reshaping our care services while tackling NHS backlogs all at the same time, have to be faced.

But it was also a week in which moods on both sides of the Commons swung wildly amid the new uncertainties, causing anxieties and a sense of dislocation among MPs. When details of the NI rise were announced in full, Johnson’s best line was that he had ample reason to break promises in the national interest and that the public would accept that. “A global pandemic wasn’t in anybody’s manifesto,” he said.

The prime minister makes a statement in the Commons on the government’s plans to introduce a health and care levy.
The prime minister makes a statement in the Commons on the government’s plans to introduce a health and care levy. Photograph: AFP/Getty Images

And when the package seemed, to some extent, to address worries about generational unfairness by making clear that pensioners still in work would also pay, there was a degree of temporary relief among some on the Conservative side. On Wednesday, the government comfortably won a symbolic vote to approve the measures, though a good number of red-wall Tories and others withheld support or voted against.

So had Johnson, despite a degree of internal division, pulled it off, showing a new side to his leadership? That was the worry that initially permeated a Labour party lagging behind in the polls despite Covid, Afghanistan, and Home Office chaos over immigration as boat loads of migrants head to the UK from France. One depressed very senior Labour figure told the Observer on Wednesday as Labour prepared to vote against the health and social care plans: “I can no longer listen to the slot on the Radio 4 after 8pm when we put someone up to say how awful everything the government does is, and then can’t answer what we would do instead. I just want to put the duvet over my head.”

Yet if tails at No 10 were briefly up following the vote, big decisions involving money and complex reform are always difficult to judge too quickly, and can unravel under closer inspection as the experts get to work on them.

Johnson’s announcement, which front-loads most of the £12bn a year raised to clearing the NHS backlog and leaves questions of by how much and when social care will benefit unanswered, was a case in point. When the thinktanks had crunched the numbers and MPs looked at the detail, a sizeable number were seriously unimpressed. The Tory MP for Stevenage, Stephen McPartland, was one of many who complained that if the aim had been to end the threat of people having to sell their homes to pay for their care, it had failed. “The new health and social care levy provides no new money to fund social care for three years. No money for living costs, only personal care costs. Selling your home is just deferred. It is a tax on jobs,” he said.

A former Tory minister added that he was worried that the NHS backlog would take years to clear, and that it was hard to see how funding could ever be switched to social care as this would mean cutting NHS budgets at that point, something he called “politically suicidal”.

As the scrutiny intensified, Johnson and his ministers were forced into admitting that they were unable to rule out more tax rises in future, given the state of the Covid-ravaged public finances. The care plan his government published explicitly raised the prospect that council tax, which has already risen by 16% above inflation since 2015-16, would have to go up again soon if local councils are to pay for soaring care bills in their areas without cutting other services massively.

Kate Ogden, a research economist at the Institute for Fiscal Studies, told the Observer that worries about more council tax rises were fully justified. “The government’s announcement of an extra £5.4bn for social care over the next three years should help councils across England reverse some of the significant cuts made to adult social care during the early-to-mid 2010s, which left spending per person 7.5% lower in real-terms in 2019–20 than a decade earlier.

“However, this plan is far from offering a sustainable funding solution for the local government sector as a whole. Buried in the detail is the suggestion that going forwards, councils will still be expected to meet demand and cost pressures through council tax rises and finding efficiency savings. Unless more generous funding for councils is announced at the upcoming spending review, we can still expect significant council tax rises in the coming years if rising needs and the myriad of pressures facing other council services are to be met.”

On Friday the first early signs of how the public viewed the idea of big tax increases to pay for social care and the NHS surfaced – and they did not make good reading for Johnson and his ministers. A YouGov poll for the Times, taken after Tuesday’s announcement, showed Tory support had fallen to its lowest level since the general election, standing at 33%, while Labour had surged into the lead, up to 35%. It was the first time Keir Starmer had been ahead since January. Six out of 10 voters did not think Johnson or his party cared about keeping taxes down. Less than a quarter of all Tory voters believed the party still supported low taxation.

An Opinium poll for the Observer today confirms the trend: both major parties are neck-and-neck on 38%. Johnson’s personal ratings dropped to an all-time low of 17%.

Opinium/Observer poll: State of the parties

Suddenly, Labour MPs and strategists were breathing easier, thinking that perhaps their approach of holding back on detailed policy on social care and how to fund it might have been the wisest of choices. The view in the shadow cabinet is that Labour will produce its policy in due course, well before any election, but not now. That is another gamble, but one that plenty in the party think could pay dividends in the short term, even though it will invite more charges that Starmer lacks ideas.

Many MPs on both sides of the Commons point to the uniquely rocky road ahead for Johnson’s government as it heads into a difficult autumn. October could prove to be a pivotal month as the prime minister and his chancellor Rishi Sunak have to decide whether and how to reverse many of the pandemic subsidies they paid out, while also setting the tax and spending policies they hope will carry the party into the next election with a booming economy and healthier public finances.

On 30 September, the furlough scheme that has protected more than 11 million jobs over the last 18 months will close. Economists expect around one million people are likely to be affected by the closure, and while many will be retained by their employers, others will be let go in the following weeks as firms discover there is not enough work for them to do, likely pushing up the unemployment rate.

Chancellor Rishi Sunak in Downing Street.
Chancellor Rishi Sunak will present a three-year Whitehall spending review next month. Photograph: Tayfun Salcı/Rex

A cut in universal credit of £20 a week, or of more than £1,000 a year, is in the offing too, though there is some Tory pressure for a U-turn, partial or complete, to head off further political damage. The reduction in incomes to levels seen before the pandemic, which will save the government around £6bn, has come under fire from across the political spectrum for hitting some of the poorest sections of society.

This move will coincide with plans to terminate protections against rent arrears and bankruptcies that have prevented thousands of people who were unable to work during the pandemic from losing their homes. At the beginning of the year, the charity Citizens Advice said 500,000 people were in rent arrears, and that 58% of them had fallen behind only since the start of the pandemic. The figures are expected to be the same when landlords and debt collectors regain the right to pursue bad debts.

In late October, the chancellor will present a three-year Whitehall spending review and a budget covering the rest of the parliament. These are expected to mark a second decade of austerity measures that will test the tolerance of voters still further – particularly in areas the Tories took from Labour at the last election.

Sunak’s existing plans allow for public spending to increase by around 4% above inflation, if the £12bn allocated to health and social care last week is included. However, it is expected that the lion’s share of the extra cash will be allocated to other areas of health spending and schools, leaving other departments such as justice and transport, which both suffered 40% budget cuts in the decade to 2020, to cope with only small increases. More austerity is not what voters in former Labour heartlands turned to the Tories for. “They want to see their areas levelled up,” said an anxious ex-cabinet minister.

Last week saw merely the first financially painful announcement in a series that will straddle the autumn as government and the opposition parties decide what strategies to adopt to deal with the enormous impact that Covid-19 has had on our lives. While Johnson may have hoped to reap a political dividend from showing strength and leadership over the health and care levy, this weekend it is far from clear that raising taxes and breaking promises will have that effect.

As another former cabinet minister put it, the political consequences could be precisely the reverse: “Behind the red wall, the idea of us being a high-tax, high-spend party will be very damaging in the longer term. Many of those working-class voters who backed us last time did so because they saw Jeremy Corbyn as a threat to the little money many of them have. They will not be happy if it us who hit them in their pockets when we promised to improve their lives.”


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