Boris Johnson is facing a Cabinet revolt over social care after Business Secretary Kwasi Kwarteng publicly dismissed the idea of funding a new policy by hiking national insurance.
The PM, Chancellor Rishi Sunak and Health Secretary Sajid Javid are believed to be on the verge of agreeing a 1p increase on NI contributions to raise up to £10billion a year.
That would pay for a lifetime cap on the amount people contribute towards their care.
However, in a round of interviews this morning Mr Kwarteng pointed to the vow in the Tory manifesto that NI, income tax and VAT will not be increased during this Parliament.
‘That’s what it says in the manifesto, I don’t see how we could increase national insurance,’ he told Sky News.
‘But you know things have been very flexible over the last 18 months, we’ve lived through an unprecedented time, we’ve been spending huge amounts of money that we never thought was possible and it’s up to the Chancellor and the Treasury, and the wider Government, to decide a budget.’
Mr Kwarteng added: ‘I don’t think we’ll put up national insurance in that specific…’
Economists have been scathing about the idea of raising revenue for social care through NICs, branding it the least fair way as it hits those on the lowest incomes and pensioners do not pay.
However, the premier appeared to pave the way for the move at a press conference earlier this week by sidestepping questions about whether the manifesto commitment would be honoured.
There are reports that the levy could start as early as next year and also be used to fund a 3 per cent pay award for NHS staff, which was announced last night.
Mr Johnson’s attempts to reach cross-party consensus on social care suffered a blow yesterday as Sir Keir Starmer labelled the NICs funding stream a ‘jobs tax’.
Sir Keir argued at PMQs that charging businesses could deter them from employing extra people.
The Labour leader said: ‘The trouble is that nobody believes a word the Prime Minister says any more.
‘He promised he had a plan for social care, but he has ducked it for two years. He promised not to raise tax, but now he is planning a jobs tax.’
Mr Johnson had hoped to unveil his reforms this week. But as he and Chancellor Rishi Sunak are both now isolating thanks to the Covid ‘pingdemic’, the changes have been delayed until the autumn – after Parliament’s summer recess.
The NI plan faced criticism because it would hit lower-paid workers more than an increase in income tax, and because those of pension age do not pay NI even if they still work.
On Tuesday night the architect of the care cap said wealthy pensioners should contribute towards the costs of reforms.
Sir Andrew Dilnot said England’s social care system is a ‘massive political failure that has gone on for decades’.
And he said any tax rise to pay for the reforms should encompass those past retirement age as well as those below it.
Sir Andrew told BBC Newsnight that a rise in income tax would be more sensible, as that encompassed pensioners.
However, the move would be controversial because Mr Johnson’s 2019 manifesto pledged not to increase income tax, NI or VAT.
Sir Andrew said: ‘I think there’s a strong case to be made for making sure that however the money is raised those over retirement age as well as those under retirement age make a contribution.
‘About half of social care spending is actually on people of working age not on the elderly and three quarters of us will in the end need social care.
‘But I certainly think it’s entirely reasonable and appropriate that people over retirement age as well as under retirement age should pay towards this thing that will benefit many of us.’
Sir Andrew, an economist, came up with the idea of a lifetime cap on the amount spent on care back in 2011.
Mr Johnson is understood to be wedded to the idea of a cap set at £50,000 – in line with Sir Andrew’s proposals. But the Treasury is concerned at the cost and insisting on more revenue being raised to foot the bill.
Sir Andrew added: ‘I think pensioners who have enough income and wealth to pay should.
‘One of the attractions of income tax for example is that income tax, which is paid by people regardless of their age, is paid strictly taking into account people’s income position.
‘And so I don’t think poor pensioners should pay for this, pensioners who have no income shouldn’t be making a contribution, but I can’t think of a very strong argument why a pensioner with a high income shouldn’t contribute in much the same way as a person aged 50 with a high income.’