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How to Fund Care

Nick Kempe – September 10th 2021

Boris Johnson’s announcement on Tuesday that the UK Government intends to raise  National Insurance to fund care and address the backlog in the NHS was not picked up by Nicola Sturgeon in her speech on her Programme for Government later that day: neither to criticise it nor to point out the implications for the National Care Service the Scottish Government has committed to creating over the next year 

As many commentators have pointed out National Insurance in its current form is regressive.  But instead of using the opportunity to suggest fairer ways of raising revenue to pay for care, from removing the upper earnings limit on National Insurance – which means people with high wages pay less – to taxing unearned income, silence. 

There was silence too about plus financial windfall that is coming the Scottish Government’s way due to Barnett consequentials of the National Insurance increase.  Since Health and Social Care is 100% devolved, Scotland should receive 9.7% of the £12 billion raised or £1.124 billion.  That should transform the debate about what a National Care Service might do.

Up until now there has been no real discussion about the resources that would really be required to fund a National Care Service or how the revenue for that could be raised.  Most the recommendations in the Independent Review of Adult Social Care were uncosted and it made no attempt to explain how even the resource gaps it identified could be plugged.  Not a single one of the 95 questions in the Scottish Government’s current consultation on a National Care Service covers the resources that would be needed or how the revenue for this could be raised.  While the Scottish Parliament’s current powers might not have been sufficient to address these issues, the Scottish Government has now been handed financial solution on a plate.

As a consequence, the Programme for Government already looks out of sync while the National Care Service consultation looks a missed opportunity.  We should not blame the Scottish Government for failing to see that Boris Johnson might actually eventually do something about his promises to fix the care issue.  But to illustrate the degree to which the situation has changed, the SNP’s election manifesto committed to increase spending on adult social care by 25% or £800m a year by the end of this Parliament.  If the National Insurance increases are implemented on 1st April 2022, they now have an additional £4.496 billion they could spend on social care and the NHS before the next Holyrood elections in May 2026. That is a huge increase.

The risk is that both the UK and Scottish Governments spend most of this extra money on the NHS and the only money that is directed to care is spent on reducing care home fees (for an excellent analysis see here). That risk is illustrated by the spending proposals in Scotland’s Programme for Government which, in the section on health and social care, says a lot about the NHS but very little on care.  While the proposed 25% increase in spending on frontline health services over the course of this parliament is similar to social care in percentage terms, the starting points are very different.  There is no mention that funding for social care has been significantly cut over the last ten years relative to health.  The Programme for Government proposes to invest £10bn in health infrastructure over the next decade but says nothing about the need for improved care infrastructure.   

But then the assumption of the Scottish Government up until now and following the Adult Care Review is that care infrastructure is best provided by the private sector, the same sector that is sucking resources out of the system.  The likely windfall from the UK Government should provide an opportunity for the Scottish Government to make the argument for progressively taxing wealth, including the care providers based in tax havens, and to  re-think their current proposals for a National Care Service.  Instead of using the extra money to prop up the private sector, which is likely to be what happens in England, they should use it to create a not for profit National Care Service equal in status to the NHS.  Funding care properly is arguably the best way to reduce future demand on the NHS and, if the Scottish Government is serious about preventative services, there is a strong argument it should dedicate most of any additional revenue by the National Insurance increases to care, not health. Common Weal’s Care Reform Group is currently working up more detailed more detailed proposals for this.  It’s an opportunity that should not be missed.

3 thoughts on “How to Fund Care”

  1. Michael Breslin

    Exactly right. Spend on care, done properly, will save the NHS money. So yes, spend the bulk of this extra money on care.

  2. Michael Picken

    Pedant’s corner: the Scottish Government does NOT receive a share of income raised by the National Insurance change; the Scottish government receives a share of the increase in spending in England on non-reserved areas. In practice this is not likely to be greatly different as this is a hypothecated tax, but the difference in principle is more than semantic.

    Because it is a hypothecated tax that does not meet anything like the costs of the services it contributes towards, the UK government is saying that it will put in place powers of direction over the whole of the health and social care budgets of all three devolved administrations. This IS an attack on devolution and follows on the directive elements of the UK Internal Market Act and the enforced withdrawal from the ERASMUS scheme. We should also note that the decision to change Public Health England into the “UK Health Security Agency” is also more than just semantic, as it is clear that the UK government intends to ‘top slice’ an increasing proportion of health and social care spending in favour of its political priorities especially the types of private outsourcing we have seen in the UK Test & Trace system.

    It would be great if the Scottish Parliament could use taxes on wealth to fund a care system fit-for-purpose, but it currently has neither the fiscal nor legal powers to do this. Even the NI changes for workers in Scotland uses the English system of income tax threshold bandings, not the slightly more progressive Sctish one.

    We therefore need a campaign to both prevent the massive rollbacks of the existing devolution system while mobilising for the powers that independence gives. The weak proposals for the so-called National Care Service will convince nobody that this is adequate. There is no technocratic solution within the current constraints. What we need is a radical political campaign of defence and mobilisation for the future service we need.

  3. Michael Picken – your assertion that “the UK government is saying that it will put in place powers of direction over the whole of the health and social care budgets of all three devolved administrations” is truly alarming. Can you please direct me to where this is said?

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