Last reviewed 8 September 2021

The Prime Minister’s proposals to raise National Insurance (NI) to fund health and social care have been greeted with dismay across the whole range of business groups.

Build back better: Our plan for health and social care can be found here.

It includes what the Government is calling a new Health and Social Care Levy, a UK-wide 1.25% increase in National Insurance contributions (NICs) ring-fenced to fund the investment in health and social care set out in the plan.

The proposal emphasises that 70% of the money raised from businesses will come from the largest 1% of businesses, while 40% of all businesses will pay nothing extra.

The NIC increase will, the Government calculates, cost £255 a year for someone earning £30,000 and £505 a year for someone on £50,000.

Key proposals

The plan proposes that:

  • people will no longer pay more than £86,000 in care costs — not including food and accommodation — over their lifetime, with effect from October 2023

  • those with between £20,000 and £100,000 in assets will get means-tested help towards costs from their local council. Anyone with less than £20,000 will not have to pay towards care costs from their assets, but might have to contribute from their income.

At first, the majority of the funds raised will go towards catching up on the backlog in the NHS created by Covid.

The Government will invest £5.4 billion in adult social care over the next three years to deliver the funding and system reform commitments set out in Building back better.

Business reaction

While the Prime Minister is facing some opposition from his own backbenchers, and even parts of the media where he can normally expect support, the main opposition to his plans is coming from the business community.

Employers’ groups seem united in dismay with the British Chambers of Commerce (BCC) describing the new levy as “a drag anchor on jobs growth at an absolutely crucial time” and the Federation of Small Businesses (FSB) saying that it will leave business owners and sole traders feeling demoralised at the point when they are trying to recover from the most difficult 18 months of their professional lives.

While accepting that social care reforms and greater investment are long overdue, the CBI warned that the rise in NICs will directly hurt a business's ability to hire staff and the Institute of Directors (IoD) said it was an extraordinary time to be adding additional burden to business.

Its chief economist, Kitty Ussher, said: “It smacks of political opportunism, exploiting public sentiment at the expense of some of the most productive and entrepreneurial segments of the economy.”

Even the TUC dismissed the plan as vague promises of money tomorrow, with General Secretary Frances O’Grady saying: “The only difference it will make to low-paid care staff is to push up their taxes”.