Boris Johnson announces National Insurance and dividend tax hike to 'fix social care'

ITV News Deputy Political Editor Anushka Asthana reports on Boris Johnson's new reforms to 'fix social care'

National Insurance contributions will be raised by 1.25 percentage points in order to fund Boris Johnson's plans to fix what he says is a "broken social care system".

The prime minister, announcing to MPs how he will pay for the reforms, said dividend tax will also increase by the same amount - with this levy designed to target those who own shares.

Main changes to care funding:

• National insurance to raise by 1.25 percentage points from April next year

• Dividend tax will increase by same amount at the same time

• A cap of £86,000 on lifetime contributions to care will be introduced in October 2023

• From October 2023 no one with assets below £20,000 will pay a penny for care

Only those with assets over £100,000 will be expected to fully fund their own care, but no one will pay more than £86,000 for their social care, regardless of their assets.

People with assets below £20,000 will have their care costs covered entirely by the government.

And those with assets between £20,000 and £100,000 will be expected to contribute to their own care but will receive government support which will vary depending on the person's finances.

The government said the National Insurance increase will mean people on a salary of £24,000 will pay an additional £180 per year.

For those earning £67,100 a year they are expected to pay £715 extra per year.

The proposed tax will take effect in April next year, if they are approved by Parliament as is widely expected, while adjustments on contributions to care will come in October 2023.

Social care groups have welcomed the plans as a first step toward dealing with the social care crisis, but urged for policy announcements to materialise into action on the ground.

Stephen Chandler, the president of the Association of Directors of Adult Social Services, told ITV News: "We have waited a quarter of a century for a government to set out its plans for the sustainable funding and reform of adult social care. This is an important and welcome first step.

"The next steps are equally crucial. We must use the additional funding to address the immediate challenges we face today, whilst working with the government and those who draw on adult social care to transform care and support for the future.

"This is not about securing additional funding to simply deliver more of the same; it is about using this opportunity to do something fundamentally different. "

ITV News UK Editor Paul Brand reports on how the latest social care reforms affects carers and care homes

Cllr James Jamieson, chairman of the Local Government Association, added more investment is needed to deliver a sustainable care system for future generations.

"Greater information is needed on what proportion of the new levy will come to social care, including when and how the funding will be distributed," he said.

"The Spending Review must also set out how immediate and short-term pressures will be addressed, along with funding to improve the quality, quantity and accessibility of care and support."

In 2023 National Insurance will go back down to normal levels and a new health and social care levy will be introduced at the same rate, which will appear as such on people's pay slips.

The levy will be paid by working adults including those over state pension age.

What are the new social care reforms and how much will it likely cost?

The PM told the Commons: "From next April, we will create a new UK-wide 1.25% health and social care levy on earned income hypothecated in law to health and social care with dividend rates increasing by the same amount. "

He acknowledged the new health and social care levy breached a Tory election commitment but told MPs "a global pandemic was in no-one's manifesto".

The plan is expected to raise £36 billion over the next three years, with the majority going to fund the NHS to help reduce the treatment backlog - £5.3 billion a year will go to social care.

The proposed increase to National Insurance will be put to a vote in the House of Commons on Wednesday.

Labour leader Sir Keir Starmer attacked the prime minister's plan, not just for the way it will be funded, but for lacking detail on how it will improve the system.

Watch Boris Johnson's announcement in full:

He said: "The blunt and uncomfortable truth is that under the prime minister's plans the quality of care received will not improve - there is no plan for that.

"People will still go without the care that they need - there is no plan for that; Unpaid family carers will still be pushed to breaking point - there is no plan for that; Working-age adults with disabilities will have no more control under their lives - there is no plan for that; Pay and conditions will not improve for care workers - there is no plan for that."

"Let me spell that out - a poorly-paid care worker will pay more tax for the care that they are providing without a penny more in their pay packet and without a secure contract."

Sir Keir also attacked the prime minister for breaking the 2019 general election manifesto pledge to not raise taxes.

He said Mr Johnson's plan would hit "young people, supermarket workers and nurses" hardest.

It means a "landlord renting out dozens of properties won't pay a penny more but the tenants working in full-time jobs would", he said.

"Read my lips: the Tories can never again claim to be the part of low tax."

The Institute for Fiscal Studies (IFS) said the increases would "raise the tax burden in the UK to the highest-ever sustained level".

It added that the burden will be further shifted toward working age people.

The National Insurance increase means someone earning £28,388 will now pay 20% of their income in taxes, the IFS said, while a pensioner receiving the same amount in pension "will pay just 11%".

Prime Minister Johnson chaired Cabinet on Tuesday morning to discuss his plans before revealing them to the public and it may have been a tense meeting, with a number of ministers reportedly unhappy about any tax rises.

But, as Political Editor Robert Peston says, a revolt was unlikely due to the loyalty of ministers to their leader.

Instead the plan - "stitched up" by the PM, Chancellor Rishi Sunak and Health Secretary Sajid Javid, according to Peston - will come under attack from all sides in the House of Commons.

The prime minister says his government "will not duck the tough decisions" needed to "fix our broken social care system".

Number 10 said a lack of integration between the two often sees people “stuck in the wrong care setting, and families worry about meeting the costs of care if they leave NHS provision”.

Downing Street described the situation as “unfair and often catastrophic” where someone who has dementia may have to pay for their care in full, while someone cared for by the NHS would receive care for free.

Under current arrangements, anyone with assets over £23,350 pays for their care in full, but Number 10 said the costs were “catastrophic and often unpredictable”.

Chancellor Rishi Sunak said the social care announcement had "created an expanded safety net".

He told a press conference in Downing Street: "Instead of individuals having to bear the financial risks of catastrophic care costs themselves, we as a country are deciding to share more of that risk, collectively.

"This is a permanent new role for the Government, and as such, we need a permanent new way to fund it."

Mr Sunak said the "only alternative would be to borrow more indefinitely", but he branded this "irresponsible at a time when our national debt is already the highest it has been in peacetime".