The government has faced a backlash from Labour MPs about its plans to effectively hike National Insurance and introduce a tax on dividends to fund social care reform.
Under plans announced today (September 7), from October 2023, individual care costs will be capped at £86,000, with an extra 1.25 per cent of National Insurance contributions and a £1.25 per cent tax on share dividends set to fund the plans.
Labour MP Dame Margaret Hodge has called the plans the "least progressive option" to fix health and social care.
She challenged Boris Johnson on why he ignored “a raft of better alternatives”, for example, raising income tax or capital gains tax to raise funds for care
But the Prime Minister said these measures would not have raised anything like what was needed.
When announcing his plans, Johnson said he accepted he broke the manifesto promise to not raise NI but said it was not a decision made lightly, saying it was the "right, reasonable and fair approach".
Labour leader Sir Keir Starmer has said the government’s social care proposals were "a sticking plaster over gaping wounds”.
Starmer said people will still face substantial costs under the new plans and some might still have to sell their homes to fund their later life care.
Starmer said: “The pretence that the Prime Minister is only here because of the pandemic is not going to wash. He is putting a sticking plaster over gaping wounds his party inflicted.
“He made that commitment on social care before the pandemic and he said he would pay for it without raising taxes before the pandemic.”
He went on to call for those “with the broadest shoulders” to pay more.
The government should be asking for more from wealthier people including income from stocks, shares, dividends and properties, Starmer said.
The government's proposed dividend tax will raise £600m from investors and the self-employed and is likely to hit company directors who pay themselves via company dividends in addition to salary more than retail investors, according to analysis from AJ Bell.
Pension and Isa wrappers are sheltered from the tax. Buy to let landlords will also be exempt unless they have incorporated their portfolios into a company.
In response to the criticism, the Prime Minister accused the opposition leader of having "absolutely no plan" and said Labour had no idea of how it would raise the money.
Andrea Leadsom, Conservative MP for South Northamptonshire, stood by her party, saying there will be many people across the country who will be relieved today that health and social care will at last be resolved.
Social care reform has been on the list of the government's things to fix for some time, with successive governments promising to address the issue and subsequently not following through with their promises.
This Prime Minister too has promised repeatedly to 'fix' the social care system and the Conservative party manifesto promised to address the issue.