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The Rich Should Pay For Social Care

The government's National Insurance increase will hit workers and the poor the hardest, while letting billionaires, landlords, and corporations off the hook. The alternative is simple: tax wealth instead.

Credit: iStock / Getty Images Plus

We heard it first, as a rumour, a few weeks ago; then, this week, it was confirmed. The government—or at least the prime minister—is proposing to ‘sort out’ social care funding by increasing taxes on workers, through lifting the rate of the National Insurance Contributions they and their employers pay.

As I write this, the outcome of today’s Commons sitting isn’t yet known: but the very fact that proposals such as these are being mooted merits comment in itself. That’s because in its current form, National Insurance (NI) is about as regressive as it’s possible for a tax to be. Consider all of these factors:

  • It’s charged on earned income, as opposed to unearned (such as rents, dividends, and interest);
  • It kicks in at an earnings level well below that at which income tax starts to be levied;
  • It tails off on earnings over £50,268 – so the better paid among us end up being charged a significantly lower rate, overall, than the less well paid;
  • For those who can plan their work so as to be self-employed, incorporating a company and charging their working time through it, it’s possible to avoid a large proportion of otherwise-chargeable contributions.

That all means that the burden of this increase in taxes falls—both squarely, and unfairly—on the shoulders of those least able to pay. It falls on those who work for someone else, and who aren’t hugely well paid. To cap it all, many of those people are about to suffer the indignity of a £20-per-week reduction (£1,040 a year) in their Universal Credit payments.

Let’s not forget, too, that many of these people are the very ones who have kept the country fed, watered, nursed, transported, vaccinated, and cared for throughout the pandemic – those ‘key workers’ often getting by on minimal wages, with precarious job security and sometimes inadequate PPE, while looking after the welfare of a population in lockdown.

In this same period, a significant proportion of the better-off have managed to actually increase their net worth. It’s a deeply unfair situation – don’t you think we should be hearing today about proposals to increase key workers’ hourly wages, rather than to burden them with further financial insecurity?

It’s not as though this move would be the most efficient way to raise money to fund social care, either. There are so many better, fairer routes to solving this problem that it’s hard to fathom the logic. If increased taxes are to be a part of the solution, they could play a valuable role in helping to reduce the inequities of our messy and complex tax system, spreading the cost of services more fairly, and helping to reduce poverty, rather than exacerbate it.

If we’re serious about ‘levelling up’ in this country, and making it a place where all have the chance to thrive, we need to ensure that those most able to are the ones making a fairer contribution to the tax ‘take’. There are a number of options that should be being considered. As far as personal taxation goes, they include the introduction of wealth taxes, and an increase in Capital Gains Taxes so that they’re on a par with income taxes. When it comes to the biggest corporates, including those that have made super-profits from the pandemic (in some cases whilst paying wages so low that their workers rely on a top up of Universal Credit to make ends meet), an end to sweetheart deals and tax planning loopholes could fund the ‘gap’ many times over.

A wealth tax, in particular, might be unpopular with a certain group of voters, but it would do much to take the edge off the rising inequality that exists in this country. That in itself would be of benefit to all: there’s good evidence to show that inequality is damaging to all levels of society. Essentially, as they say, ‘we all do better when we all do better.’

My organisation, Church Action for Tax Justice, campaigns for a fairer tax system – both globally, and here on our home turf. That includes using taxes to reduce inequality and injustices, and to relieve poverty. The current proposals do the precise opposite, and for that reason, they must be resisted.