National Insurance hike to fund social care would ‘wrongly punish’ young people, says Keir Starmer

Labour leader also warns of impact on low earners, as government set to reveal tax plan

Sir Keir Starmer has ruled out Labour support for a controversial rise in National Insurance to pay for social care reform – saying it would unfairly punish young people and low earners.

Boris Johnson and chancellor Rishi Sunak are thrashing out the final details, but the government is set to announce a tax hike to raise around £10bn per year to help “fix” the social care system.

Reports suggest National Insurance will be increased by 1.25 per cent – sparking angry warnings from Conservatives about the danger of breaching the 2019 Tory manifesto not to raise NI, income tax or VAT.

The Labour leader made clear he also opposed using NI, saying it would disproportionately affect younger and lower income workers.

“We do need more investment in the NHS and social care. But National Insurance, this way of doing it, simply hits low earners, it hits young people and it hits businesses,” said Sir Keir.

“We don’t agree that is the appropriate way to do it. Do we accept that we need more investment? Yes we do. Do we accept that NI is the right way to do it? No we don’t,” the Labour leader told The Mirror.

On Sunday shadow cabinet minister Lisa Nandy indicated Labour was ready to consider a tax on wealth to help pay for social care, and the TUC called for a £17bn hike to capital gains tax to fill the funding gap.

Backing the “broad principle” that those with most should bear the greatest burden, Ms Nandy said this could mean that “those who make their money out of something other than income – out of assets – pay a bit more”.

Sir Keir did not rule out the possibility Labour would propose an increase in capital gains tax to pay for social care, but said no decision would be reached until the next Labour manifesto.

The respected think tank the Institute for Fiscal Studies (IFS) suggested that increasing basic and higher rate income tax by just under 1.5 per cent would raise a similar amount to a one per cent hike in National Insurance contributions (NICs), and would spread the burden across the generations.

Former minister Jake Berry, leader of the Northern Research Group (NRG) of Tory MPs, warned against a plan which appeared aimed at elderly voters in affluent southern seats.

Mr Berry, one of the “red wall” MPs holding former Labour seats, told BBC Radio 4’s Today that since NI was not paid by people who are retired there was also a question of intergenerational fairness.

“It doesn’t seem fair to me – particularly following this pandemic where so many people have taken great sacrifices to keep people safe, it’s particularly hit the youngest, particularly hit those in work – that we then ask those in work to pay for people to have protection in care,” he said.

Commons leader Jacob Rees-Mogg and international trade secretary Liz Truss are believed to be among a number of cabinet ministers hostile to the NI rise expected to be announced this week.

Mr Rees-Mogg appeared to show his disapproval in his column in the Sunday Express – citing George Bush Sr’s promise not to create new taxes in his successful bid to be US president, before he went on to raise taxes and lose the next election to Bill Clinton.

Tory grandees also shared their dismay at the plan. Peer Lord Hammond, chancellor between 2016 and 2019, also said he would “vote against” any plan involving a NI rise in the Lords.

“Economically, politically, expanding the state further in order to protect private assets by asking poor people to subsidise rich people has got to be the wrong thing to do,” he said.

Lord Clarke, the Conservative chancellor between 1993 and 1997, said a NI rise would be is “too heavily weighted on the lower paid,” while former Tory PM Sir John Major warned against the move targeting workers and employers by arguing it is “regressive”.

Lifetime contributions on care will be capped at about £80,000 under the government’s plan, according to the Sunday Times. An announcement is expected on Tuesday or Wednesday this week.

Reports suggested that £5.5bn more funding has been agreed for NHS shortfalls later this year, including to help clear the backlog caused by the Covid pandemic.

Meanwhile, Sir Keir said he would be happy for his 12-year-old son to receive a Covid jab if the vaccine is an expansion in the roll-out approved by government’s chief medical advisers.

“I am in favour of everybody having the vaccine if they possibly can,” said the Labour leader. “Therefore if the advice is for that age children to have it, we would follow that advice.”