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Executive Leader Cllr Brenda Warrington

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Councillor Brenda Warrington, Executive Leader of Tameside Council

The Wrong Tax Increase for the Wrong Reasons

Friday, 10 September 2021

Earlier this week, the Prime Minister stood in the House of Commons and announced plans to increase taxes to fund NHS backlogs and reform adult social care. The vast majority of this money will come from an increase of 1.25% in national insurance contributions, raising around £36 billion in total over the next three years. Most of this will go to the NHS, with around £5.4 billion being allocated to social care. Of this £2.5 billion is expected to fund a cap on care costs, leaving only around £2.9 billion a year for overhauling and improving our adult social care sector.
 

Local leaders up and down the country, including here in Tameside, have been sounding the alarm for years regarding the critical state of social care. However, the Prime Minister’s announcements falls well short of what is needed. £2.9 billion might sound like a lot of money, but when you consider that almost £7.7 billion has been taken out of the care system since 2010 due to politically-driven austerity it is clear that the money on offer barely begins to cover the gap.

We have already seen the damage that this decade of neglect has wreaked upon the entire social care sector. Trade unions and care homes operators are warning of an unprecedented recruitment crisis due to low pay, insecure contracts and poor working conditions for staff. Unpaid carers are still taking on significant burdens, often at great financial or personal cost, with little to no support. Insufficient funding of our care system is also leading to situations where many people are both unable to pay for their own care and ineligible for financial support. These are issues that need resolving right here and now, but still the government remains silent.

But there is a deeper problem with how this inadequate amount of money has been raised as well. Since National Insurance is mostly paid by people of working age and their employers, those who are being asked to contribute the most in this tax rise are also the least likely to benefit from it. The non-partisan Institute for Fiscal Studies estimates that over 2/3 of the tax rise will be paid for by families under the age of 50. Those people who mainly get their income from investments, particularly property, are also likely to avoid much of the impact of this increase. We know that younger working people are already bearing of the brunt of the coronavirus pandemic, ten years of austerity, and the rise in inequality in our society. Asking them to pay even more raises issues of basic generational fairness.

 

So what’s the alternative? Increasing income tax – which state and private pensions are subject to - instead of national insurance contributions would make the burden more equitable. But I still believe that any tax system is fairest when it requires those with the broadest shoulders to pay more. I agree with the Mayor of Greater Manchester Andy Burnham that the time has come to look seriously at taxing wealth as much as work. Increasing capital gains tax – currently set at 18% - to the same level as income tax would raise £90 billion over five years from some of the wealthiest in our society. When combined with other income raised from property taxes or estate contributions, we would be able to create a comprehensive social care system, free at the point of use and available for all, that would provide peace of mind while asking the majority of people to pay far less than they are now.

After a decade of cuts, fixing our broken social care system is going to require us to ask fundamental questions about what kind of services we expect, and what we need to do to pay for them. The government’s actions this week do neither, and at best will only delay the inevitable reckoning. As always when it comes to austerity, it is the poorest and most vulnerable that will end up paying the price.

 

Posted by: Executive Leader


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