Boris Johnson unveils £12bn-a-year tax rise to pay for NHS and social care

PM makes statement to MPs after cabinet agreed to 1.25 percentage point increase in national insurance contributions

Boris Johnson has confirmed his government will impose a manifesto-busting £12bn-a-year package of tax increases from next April to tackle NHS Covid backlogs and overhaul social care. The cabinet signed up on Tuesday morning to a controversial 1.25 percentage point increase in national insurance contributions, which will be levied on employers and employees. Tax on share dividends will also be increased by 1.25 percentage points, in a move expected to raise £600m.

Much of the revenue initially will be devoted to cutting waiting lists in the NHS, with social care receiving only £5.3bn of the £36bn expected to be raised over the next three years. From 2023-24, once HM Revenue’s computer systems have been updated, the NICs increase will be rebadged as a health and social care levy, which will appear as a separate line on payslips. It will be extended at that point to cover pensioners who are still in work, and the proceeds hypothecated – put into a separate pot by law.

Over time, a growing proportion of the revenue raised will go to social care, allowing the government to implement a new cap on total care costs, so that no individual will have to pay more than £86,000 over their lifetime. Anyone with under £100,000 in savings will receive some state help under the new system – with care funded completely by the state for those with less than £20,000. The prime minister called the plan “the biggest catch-up programme in NHS history”, and said it would also “fix the long-term problems of health and social care that have been so cruelly exposed by Covid”.

While the new social care cap will apply only to patients in England, the levy will apply across the UK. The government said health services in Scotland, Wales and Northern Ireland would receive an extra £2.2bn a year. The leader of the House of Commons, Jacob Rees Mogg, announced that MPs will be given a vote on the proposals on Wednesday, with the government keen to secure the agreement of its backbenchers before the party conference season kicks off later this month.