Increase in NI contributions would generate £5 billion extra to fund social care

A rise in National Insurance contributions by one per cent would raise up to £5 billion immediately towards social care funding, new research has found.

The increase in National Insurance tested as the most progressive and politically achievable option when compared with other options for filling the funding gap including increasing inheritance tax, removing the triple lock on pensions or means-testing the Winter Fuel Payment.

The research came from Independent Age, the older people’s charity, and the IPPR, the UK’s progressive think tank.

The pressures on the adult social care system are likely to increase as demand for care outstrips the funding available in the system.

Estimates predict the care funding gap may climb as high as £2.7 billion by 2020/21 and £9.5 billion by 2030/31. However, this is simply the mint needed to preserve the system in its current form. The reality is that much more funding will be needed to meet the increasing demand presented by an ageing population and improve the overall quality of care on offer.

Key findings of the research include: an immediate one per cent increase in National Insurance would see the poorest working families lose £20 per annum compared to £1,220 per annum for the richest families, making it the most progressive option; changes to benefits are unlikely to raise enough to meet the minimum amount needed to fill the social care funding gap; a wealth tax, added on top of Inheritance Tax, at a 13 per cent rate could raise up to £6.5 billion a year; no meaningful options for increased funding of social care are an easy ‘sell’ to the public, and the principle of intergenerational fairness will be an important factor as the government starts consulting on funding options as part of its promised Green Paper.

The report recommends the government explain the extent of the crisis in social care, alongside setting out measures that can realistically be acted on in this Parliament and secure cross-party support.

Janet Morrison, chief executive of Independent Age, said: “Social care is in desperate need of a sustainable funding solution. However, for all the short-term solutions governments have introduced, the care system needs meaningful change that will work over the long-term. Hundreds of thousands of older people rely on the social care system, either in their own homes or in a care home, and demand for services is only going to increase. Government must face up to facts and stop kicking the can down the road. It needs to confront the difficult decisions about how to fund the social care system because the problem is not going to go away.

“A rise in National Insurance contributions represents one possible way of addressing the funding gap, but even this option has its political complications. Government must use its Green Paper to examine all the future funding options, and be straight with the public about what is needed to fund a social care system that can truly meet the demands of our ageing population.”

Harry Quilter-Pinner, research fellow at IPPR, said: “Since 2010 social care has faced unprecedented cuts in funding. This is now taking its toll with huge numbers of people unable to get the support when they need it most. Pressures on quality and safety on the frontline are now at a dangerous tipping point.

"In their manifesto at the last election the government promised to lead on social care "where others had failed". They must now deliver on this promise with a long term sustainable funding settlement urgently needed.

"Our research shows that finding extra funding is possible - the public are willing to consider tax rises or changes to benefits - but government will have to design this carefully to ensure the public perceive any solution to be fair.”

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