Fact checked: six key claims about the new health and social care plan

One story has dominated headlines this week—the government’s new plan for health and social care and how it plans to fund it by raising National Insurance. So we’ve taken a look at some of the key claims we’ve seen in Parliament and the press about the new proposals.

The top 20% of households by income will pay 40 times what the poorest 20% will pay.

This statistic appears in the Treasury’s analysis of the health and social care plan. The department told Full Fact that the analysis was based on Treasury models and estimates, as well as projections for the cost of living based on historic data.

Tom Waters, senior research economist at the Institute for Fiscal Studies (IFS), told Full Fact that the statistic looked correct, though he added that his own analysis of the plan found that the 20% of households with the highest income were set to pay closer to 60 times what the 20% of households with the lowest income would pay. 

He said: “I don’t find it terribly surprising that this differs from what the Prime Minister has been saying because the bottom 20% of households pay so little in tax that even a small difference in modelling or data could cause a large proportional change. 

“This will be significantly driven by the fact that low income households often have no one in work and so aren’t affected by the tax. Only about 1% of income tax and National Insurance contributions are paid by the lowest income 20% of households.”

The Institute for Fiscal Studies has confirmed that this [the Health and Social Care Levy] is a broad-based and progressive measure.

It is true that Paul Johnson, the director of the IFS, did say this in a public statement. But to use this quote on its own misses vital context. 

Paul Johnson’s overall verdict was much more critical of the government’s plan than the Prime Minister’s quote suggests. 

What the IFS director actually said was: “It is disappointing that the government did not find a better package of tax measures to fund these spending increases. A simple increase in income tax would have been preferable. 

“But overall much needed reforms to social care are being introduced and unavoidable pressures on the NHS are being funded through a broad based and broadly progressive tax increase. That is better than doing nothing.”

Some 2.5 million working families will face a double whammy—a national insurance tax rise and £1,000 per year Universal Credit cut.

Labour told Full Fact that this figure was calculated by Sarah Arnold, senior economist at the New Economics Foundation.

Ms Arnold tweeted her analysis of the number of households who would be affected by both the cut to Universal Credit and increase in national insurance. She found that “on average, they will lose out by £1,290 in 2022/23. 2.5 million working families on low incomes losing £1,290 - not a progressive solution.”

She told us that to calculate the figure she used a type of model called a microsimulation, which was based on government data collected through the Family Resources Survey. This annual survey gathers a broad range of data, including information about incomes, pensions and things like caring needs. 

The model Ms Arnold used was the Institute of Public Policy Research (IPPR)’s tax-benefit model, which is also used by other think tanks such as the Resolution Foundation and the Joseph Rowntree Foundation.

She said: “I used that model to calculate for 2022/2023 [and] compare basically two worlds—one in which the £20 uplift to Universal Credit and working tax credit was maintained, and one in which that was removed—and [then factored in] the National Insurance increases and dividend tax increases. 

“Then I calculated, essentially, how many households would have been eligible for Universal Credit or the working tax credit and then what percentage of those households were also affected by the National Insurance increase—so how many of them were working above that threshold [where you pay National Insurance].” 

National Insurance tax applies to employees who earn over £184 a week, or self-employed people who make a profit of more than £6,515 a year.

This is a government who [...] took £8 billion out of social care before the pandemic.

The claim seems to come from a report by the Association of Directors of Adult Social Services (ADASS), which found that by 2019 councils in England had delivered £7.7 billion of cumulative savings in adult social care services since 2010, in response to overall council funding reductions brought in by central government.

As we’ve written before, claiming this means £8 billion was taken from social care is missing some context. 

This isn’t the amount council adult social care spending has been reduced by overall—it’s the amount that councils reported to ADASS that they had collectively saved over nine years. That means it’s money that they had in previous budgets but had to make savings on. So essentially there was a £7.7 billion cumulative difference between what social care departments in local councils wanted to spend money on each year, and what there was available budget for.

However, that’s not to say overall spending on adult social care decreased by £7.7 billion—for instance because the government also provides additional pots of funding which may be time-limited and for specific purposes. In fact, as we wrote in 2019, “overall spending on adult social care has fallen by £0.4 billion in real terms (taking into account inflation) since 2010”.

The total revenue from capital gains tax amounts to less than £9 billion this year.

As part of his justification for raising dividend tax and introducing the levy to pay for the new health and social care plan, the Prime Minister said that revenue from capital gains tax (CGT) amounts to less than £9 billion this year.

This is not correct. The latest figures on the government’s tax receipts show that revenue from CGT was £10.6 billion in 2020-21. The last time it was less than £9 billion was in 2017/18 (when it was £7.8 billion).

PM announces 1.25% National Insurance hike to pay for social care in England

Some of the reporting of the new health and social care plan, as well as a government document, has talked about a “1.25% rise” in the rate of National Insurance in order to pay for it. This is not quite right.

As other reports correctly said, it’s actually a 1.25 percentage point rise.

This sounds like a technicality, but it’s an important distinction. If something rises by 1.25%, that means it gets 1.25% higher, which is often a fairly small change. A tax bill of £1,000 would become £1,012.50 if it rose by 1.25%.

However, a tax rate is itself a percentage, and percentages are often said to rise by percentage points—meaning how many steps it rises up the percentage scale. 

The government’s plan is to raise the rate of National Insurance by 1.25 percentage points . For people currently paying National Insurance at a rate of 12%, this would mean they start to pay at 13.25% instead.

When looking at a tax bill, this could be a much bigger deal. If a tax paid at 12% produced a bill of £1,000, a tax of 13.25% would produce a bill of £1,104.17.

In other words, a 1.25 percentage point rise to your tax rate could be about ten times larger than a 1.25% rise on your tax bill.

It’s worth noting the rise in National Insurance means the public will face the highest tax burden in decades—though there was some disagreement in the press over the exact time period, with various estimates including that the tax burden is the highest in peacetime, since 1948, since 1950 or since 1969. As we wrote earlier in the week, the reason these estimates differ so much is because they are calculated in different ways.