The spectre of an increase in national insurance to pay for social care reform, due to be revealed as early as next week, is sure to ruffle the feathers of millions in the UK already struggling with the financial impact of the Covid-19 pandemic.
There is no doubt about it, the UK needs more funding for adult social care. The pandemic has revealed financial insufficiencies within care homes, hospitals, mental health services, safeguarding, homelessness support, housing and a variety of other services that fall under the “social care” definition.
Naturally, the government must decide how to follow through with the social care reform the prime minister Boris Johnson promised during the 2019 general election. However, increasing national insurance is a direct violation of the same pledges. It’s predicted a national insurance increase would affect millions of people, mostly the younger generations.
Something must be done to care for the marginalised and vulnerable in our society but widespread, blanket national insurance and tax increases will only make the rich richer and the poor poorer.
Individuals and families are struggling to get food on the table after suffering redundancies and reduced incomes as a result of Covid-induced disruption. These are the people who will be hit most hard from an increase in taxes. Up to an extra £100 each year given to the taxman could dictate whether the heating is turned on when it’s cold outside. Those with higher salaries will only suffer a tiny dent in their lives – they won’t have to figure out how to eat, pay the rent and get warm.
We don’t need tax raises for everyone, we need new, progressive tax reform to ensure that the poor and vulnerable don’t pay the price of the pandemic. Victoria Perry, director of the International Monetary Fund, explained the matter succinctly on UN News: “It is certainly problematic when effective tax rates for better-off people are lower than for poorer ones. It is also often the case that better-off people, with access to tax advice and more complex financial affairs, can make better use of exceptions or loopholes in the tax system than those who rely only on wages. Closing such options can make for a more equitable system and, depending on the country, can be more important than structural reforms of tax rates.”
The tax system is hurting those on lower incomes. In response to the growing disparity between the haves and have-nots, it is time for the better off to be taxed at higher rates than those in low- and middle-income households – an idea that the shadow foreign secretary, Lisa Nandy, has said Labour is open to. Some may argue that heavier taxes for the wealthy isn’t fair. But right now, in a time of crisis, the “fair” debate needs to be put to rest and we need to make sure that the most vulnerable among us have what they need to thrive.
However, simply taxing the rich more won’t close the inequality gap. South Africa is considered to have “one of the most efficient tax systems in the world” and yet it scores poorly overall in addressing inequality, said to be in part due to its poor labour market. Reducing inequality isn’t just about taxing the rich. Simultaneously, money must be spent to improve lives – through measures such as job support, sustainable work and retraining.
Taxes are only one element in the equation of equality that needs to be solved. If those in power are going to act on their talk about lifting up society, an increase in national insurance contributions is not the way to do it.