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9 September 2021

Boris Johnson’s social care tax rise: the north pays for the south, the poor pay for the rich

The New Statesman maps out the geographical impact of the government’s National Insurance hike to cap care costs – and finds little “levelling up”.

By Anoosh Chakelian, Katharine Swindells and Michael Goodier

Just days before the House of Commons faced a vote on Boris Johnson’s tax rise to fund social care, many of his own MPs were ready to rebel. At the forefront of Tory back-bench opposition was Jake Berry, the MP for Rossendale and Darwen, former Northern Powerhouse minister and chair of the Northern Research Group of Conservative MPs, which includes representatives of Red Wall constituencies.

“It doesn’t really seem to me reasonable that people who are going to work in my own constituency in east Lancashire, probably on lower wages than many other areas of the country, will pay tax to support people to keep hold of their houses in other parts of the country where house prices may be much higher,” he told the Times a day before the plans were announced.

This concern – that the poor would pay for the rich and the north would pay for the south – was shared by numerous critics of the proposed tax rise, on both sides of the House of Commons.

[See also: Who are the winners and losers of Boris Johnson’s social care reforms?]

When announcing the plans, the Prime Minister attempted to quell such disquiet about these injustices. Dividends will also be subject to the 1.25 percentage point tax rise, which would mainly impact wealthier people with investments, and working pensioners (who do not pay National Insurance) will pay the new health and social care levy.

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These elements, among other political considerations, have made the plans “swallowable” among Conservative critics for now, as the New Statesman’s Ailbhe Rea reported. This was evident in the rebellion of just five backbenchers who voted against the tax rise on 8 September (37 further Tory MPs abstained).

Yet exclusive data analysis by the New Statesman, mapping the impact of the policy on to England geographically, suggests Berry and his fellow sceptics were right to be concerned. It appears that the south will benefit more from the changes than the Midlands and northern England – with voters in the north-east particularly effected.

These patterns contradict the impetus of Johnson’s government to rebalance the economy and repay Red Wall voters for lending it their votes in the December 2019 election, when voters in longstanding Labour areas switched en masse to the Tories.

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As Berry wrote in the Sun ahead of the plans being announced, “Boris Johnson vowed to level up but hiking National Insurance is levelling down.”

[See also: Why Tory MPs won’t rebel over Boris Johnson’s National Insurance hike]

Northern workers will lose more from the National Insurance rise

Workers in the north-east of England, who tend to have lower earnings, will pay a lower amount of National Insurance. But as the average household in the north-east has a lower disposable income, they will see more of a hit. An average £174 rise in National Insurance over the year is equal to just over 1 per cent decline in disposable income.

On the other hand, workers in the south will lose proportionally less on average due to their generally higher salaries and income from other assets. Those in the north-east will experience 25 per cent more of a hit than those in the south-west.

While Londoners will pay the most in absolute terms, people living in the north will, proportionally, suffer the biggest hit to their disposable incomes
Average impact on disposable income of 1.25 percentage point National Insurance rise, by region
Hover to explore

Map by Katharine Swindells

When breaking this down to local authority level, it appears a number of marginal or newer Tory constituencies are in areas worse effected than the Tory shires in the south-west and south-east. For example, in County Durham, and parts of Nottinghamshire, Lincolnshire and Cumbria.

In the borough council area of Blackburn with Darwen, Lancashire, for example (the latter of which is represented by Berry himself), the average worker will be paying an additional £145 a year in National Insurance to their average salary of £21,200: a hit of 1 per cent to disposable income.

In contrast, in the “Blue Wall” south-east commuter town of Sevenoaks (the parliamentary constituency of which has been Tory since 1924), where disposable income is higher due to higher salaries and more assets such as rental properties, the average worker will take a hit of only 0.6 per cent.

How much will people in your local area pay?
Average impact on disposable income of 1.25 percentage point National Insurance rise, by local authority
Hover to explore

Map by Katharine Swindells

Care costs are higher in London and the south-east

The new tax policy is aimed towards fixing England’s social care system. Part of the money raised from the levy will pay for a new lifetime cap of £86,000 on any one person’s payments towards their own care. Once the cap is reached, the remainder of any care costs are paid for by local authorities.

This cap – which applies from October 2023 – means more people living in areas with higher care costs are likely to benefit, with the council paying a higher proportion of their care.

Care provision tends to be more expensive in London and the south of England, which means taxpayers’ money will be paying for more provision down south.

Higher care costs mean more people in the south are likely to benefit from the cap
Unit cost per week for all adult clients accessing long-term residential care, by local authority

Map by Michael Goodier

Not only will people in the south be more likely to benefit from the cap, but those who do are likely to see proportionally more of their assets protected as a result of it. That is because property prices in the south tend to be higher, so people’s houses there are worth more; they have more to lose without a cap.

In contrast, those living in the north will see more of the value of their assets being spent on social care before they hit the cap, meaning many more could end up selling their homes.

Those in the south will see more of their assets protected by the care cap
Median total household wealth

Chart by Michael Goodier

To mitigate this, as well as a social care cap, the government has introduced a floor. Those who own less than £20,000 will not have to pay costs from their assets at all (but may have to from income), while those who own between £20,000 and £100,000 will be means-tested by their local council.

This will help more people in the north of the country, who have proportionally fewer assets. An analysis by the think tank Resolution Foundation found only 29 per cent of individuals aged 70+ in the north-east have sufficient assets that they might receive no state support, compared with almost half of those in the south-west.

That said, more than half of those in the north-east may still need to pay something from their assets due to the means-testing element.

The Resolution Foundation said: “The policy may not live up to its marketing, with those in modest homes with few financial assets still needing to put a charge on their homes if they need significant residential care.”

[See also: Why Tory MPs didn’t rebel over Boris Johnson’s National Insurance hike]

Although Tory angst over these reforms has been quietened for now, the geographical inequalities revealed by the New Statesman’s data analysis could soon haunt a government basing its reputation on “levelling up” the north.

Tory MPs’ current support – or begrudging acceptance – of these plans could yet slip into further rancour for the party. A Conservative MP particularly familiar with local government policy and adult social care is still “fuming” at the policy – fearing the political consequences down the line of “young taxpayers” carrying the burden for “asset-rich pensioners”, and suspecting a “sleight of hand” that will mean most of the funding goes to the NHS instead of social care itself.

Another, Dudley South MP Mike Wood, called the tax rise “morally wrong”, explaining that he was only voting for it because the alternative, “not acting, is far, far worse”.

The party risks betraying its new voters by failing to deliver on the fairer economic distribution it promised, something its MPs may discover as their constituents begin paying this new tax in the three years ahead.

[See also: Boris Johnson is exploiting the public’s misunderstanding of National Insurance]