Boris Johnson’s tax hike hides a triple whammy for pensioners

Worst of all, senior citizens are going to lose the triple lock which keeps the state pension rising in line with wages. Britain has one of the lowest state pensions in the OECD and the triple lock was supposed to remedy that. Instead pensioners are being landed with a new tax on being old.

It is also a tax on jobs. Companies will have to pay an extra 1.25% per employee. This will not help the post-furlough employment problem – though the Government appears to be hoping that bosses will hardly notice since wages are rising so fast anyway, now that cheap foreign workers are going home. But consumers will when it hits the shops.

All this so that wealthy pensioners, mainly in the south-east of England, won’t have to sell their houses. And even that’s not entirely clear under the complex new care policy which doesn’t seem to cover care accommodation costs. Tory MPs evidently think it worth it to square the social care circle. But it is not going down in Red Wall seats, and some in the Tory Cabinet think it is unfair to working people.

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That the Scottish tax burden is going up again may seem unfair to voters here, not least because the BBC described the changes yesterday as applying “to England and Wales”. So why are Scots paying more too? Free Personal Care was introduced in Scotland by the Labour-Liberal Democrat coalition 20 years ago. It was highly controversial at the time and people here also said that working people shouldn’t be subsidising, through their taxes, care for pensioners.

However, it addressed an anomaly that had long been regarded as unfair. Why should certain sick people not receive free health care just because they suffer from illnesses of age, like dementia? The NHS is supposed to be free for all who need it.

Indeed, free personal care has been a modest success in Scotland and is no longer an issue. This may partly be because, once it was introduced, recipients discovered that free personal care does not pay for hotel costs in nursing homes. This can be upwards of £700 a week. People with more than £23,000 in assets still have to sell their homes sometimes to pay catastrophic care costs.

free personal care has been a modest success in Scotland

That seems also to be the case in England under the new scheme. So Boris Johnson may well regret his bullish talk yesterday about old people no longer having to worry about selling their homes. But the point, surely, is that social care should never have been about protecting the unearned inherited assets of Millennials and Zoomers. It should have been about funding care properly and delivering equity. Why shouldn’t people who have benefited from decades of unearned house price inflation locked in their homes pay some of it back?

Free care works in Scotland because it is confined to genuine care and designed to help people remain in their own homes. This prevents old people ending up in hospital wards simply because they can’t dress or bathe themselves. Bed blocking, as it used to be called, has been reduced in Scotland, though it is still a problem, as we discovered during Covid when thousands of old people were expelled from hospital wards on the grounds that they should never have been there in the first place.

Much of the £10 billion or so in new tax money will go to meeting some of the pandemic backlog in the NHS. Indeed there are serious questions about how much will actually make it into front-line social care, which is woefully underfunded north and south of the Border.

Nowadays the NHS is overwhelmingly paid for out of general taxation, which makes it something of an anomaly that health spending is now coming out of National Insurance Contributions. NICs pays principally for pensions. Indeed yesterday’s changes may lead to what reformers have been arguing for for many years: the merging of National Insurance with income tax. Many believe this would be fairer because it would remove the ceiling on NI contributions, partially raised by Gordon Brown 20 years ago. However this would also mean that National Insurance would effectively be devolved to the Scottish Parliament, since income tax is already largely devolved.

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Nicola Sturgeon would have no complaints with that. She has also been in the merger game: trying make the care system more efficient by merging the NHS formally with social care. But apart from setting up many committees, the Scottish Government has failed to grasp the holy grail of care policy. This is largely because social care has been the responsibility of local government and it has been very difficult to get the NHS bureaucracy to marry the local authority bureaucracy.

Yesterday, Ms Sturgeon moved care to a higher level by promising to set up a National Care Service. This will look after not only the infirm elderly, but all people who need help with their day to day lives, including the disabled, children and people with mental health issues. Around 250,000 people in Scotland receive social care, though four out of five are over 65. Around 35,000 are residents of care homes

But it won’t come cheap. The National Care Service will cost about £800 million. So it is really rather convenient that Mr Johnson has already raised the money to pay for it. By the magic of Barnett consequentials, Scotland’s share of the new money being pumped into health and social care will be something short of £1 billion. That’ll do nicely. This is taxation without pain.

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