Tax raid on young and low-paid workers

Unite has slammed the government for failing to adequately fill a gaping hole in social care funding as prime minister Boris Johnson today (September 7) announced a National Insurance hike which will unfairly hit working people hardest.

Johnson unveiled the plans in the Commons on Tuesday afternoon, which will entail a 1.25 per cent increase on National Insurance contributions, levied both on employers and employees, including those still working beyond state pension age by 2023.

The hike will go into effect in April 2022, and from April 2023, the National Insurance increase will be rebranded as a ‘health and social care levy’, which will appear as a separate line on payroll slips.

Johnson said the new tax increase, which breaks Conservative manifesto promises, will raise £36bn within the next three years. But critics highlighted that the vast majority will go the NHS initially, despite the announcement being billed as a way to “fix the long-term problems of health and social care”. Until 2024, social care will receive only £5.3bn of the total raised, with the rest pumped into cutting NHS waiting lists.

‘Not a plan to fix crisis in social care’

Unite and others decried the unfairness of the new tax, which will see landlords earning rental income not having to bear any burden. Wealthy investors will also hardly have to contribute, after the government announced a modest 1.25 per cent tax on dividends. Younger workers will be hardest hit by the tax increase.

Responding to Johnson in the House of Commons, Labour leader Keir Starmer lambasted what he called “a tax rise on young people, supermarket workers and nurses, a tax rise that means a landlord renting out dozens of properties won’t pay a penny more but the tenants working in full-time jobs would, a tax rise that places another burden on business just as they are trying to get back on their feet.”

Labour deputy leader Angela Rayner likewise highlighted the unfairness of the tax.

“This is not a plan to fix the crisis in social care,” she commented on Twitter. “A care worker on the minimum wage will pay more tax for the care they are providing every day without a penny more in their pay packet or a secure contract.”

“Working people will pay twice under these changes,” she noted in a separate tweet. “First in higher taxes and second in lower wages when employers pass on the hike in national insurance. But the landlords that working people pay rent to won’t pay any extra contributions.”

Under Johnson’s plans, by October 2023, no individual would pay more than £86,000 towards their care. But any costs incurred before that date will not go towards the cap, meaning many people who have significant assets and spend a long time in need of care will be left paying far in excess of £86,000.

Those who have assets in excess £100,000 – including their own home – will have to pay for the full costs of their care up to the £86,000 cap after October 2023. Those with less than £100,000 in savings will receive some government support, while those with less than £20,000 will have their care fully funded by the government.

But Labour’s shadow health secretary Jonathan Ashworth called the care cap ‘a care con’ because the cap excludes many other costs associated with care – such as board and lodging for those who move into nursing homes.

‘Care workers need more money in their pockets now’

Unite and the TUC have both highlighted that the government has failed to do anything to tackle low wages endemic in the care sector, whose workers are among the lowest paid in the entire UK labour market. Any plan to fix the social care system must address the 170,000 vacancies which are a direct consequence of low pay and poor working conditions.

An analysis by the TUC found that the vast majority – 7 out of 10 – care workers earn less than £10 an hour, with a quarter of the workforce on insecure zero-hours contracts.

Commenting on the prime minister’s announcements today, TUC general secretary Frances O’Grady said, “Care workers need to see more pay in their pockets now. Nothing today delivered that. Instead, the only difference it will make to low-paid care staff is to push up their taxes.

“This is so disappointing after the dedication care workers have shown during this pandemic keeping services running and looking after our loved ones,” she added.

“We know social care needs extra funding. But the prime minister is raiding the pockets of low-paid workers, while leaving the wealthy barely touched,” O’Grady went on to say.

“We need a genuine plan that will urgently tackle the endemic low pay and job insecurity that blights the social care sector – and is causing huge staff shortages and undermining the quality of care people receive.”

The TUC has said increasing tax on capital gains – which includes wealth and assets – to the same level of income tax could raise £17bn a year to invest in social care services and ensure a minimum wage for care workers of £10 an hour.

Also supporting a wealth tax, Unite assistant general secretary Gail Cartmail said, “The regeneration of social care needs to have a much wider financial base than the focus on National Insurance which falls on those of working age, particularly the young, and is not paid by the retired who may own a house and have other savings.

 “Taxation policy must be seen to be fair for all, otherwise confidence in the public finances is eroded,” she added. “A ‘wealth’ tax should be seriously considered as part of a broad-based approach to underpin the reform of social care, which also needs to see that those working in the sector are paid the equivalent of their NHS counterparts. Low pay for social care jobs is a scandal that has been kicked down the road for far too long.

“The issue of NHS funding also needs to be tackled – the funding crisis in the health service is also bedevilled by vacancies estimated at 100,000 and waiting lists that will take years to clear,” Cartmail continued. “The situation is not helped by the continuing pace of privatisation in the NHS which is costly and ineffective, and only lines the pockets of the profit-hungry private healthcare companies.”

 Unite is dedicated to advancing the jobs, pay and conditions of its members and will fight back against any efforts to diminish workers’ living standards.

By Hajera Blagg