Reliefs available to ratepayers on business rate bills in England
What is the Health and Social Care Levy?
In a statement to the House on 7 September 2021 the then Prime Minister Boris Johnson announced plans to substantially increase funding for health and social care over the next three years, to be funded by a new tax: the Health and Social Care Levy. The Levy would be based on National Insurance contributions (NICs). From 2023 the Levy would be legislatively separate, and would also apply to individuals working above State Pension age, who are not liable to pay NICs on their earnings at present. In addition the rates of income tax that apply to income from dividends would be increased, to help to fund these plans.
The Government proposed that the Levy would apply to employees and employers liable for Class 1 NICs and self-employed individuals liable for Class 4 NICs. In 2022/23 the Levy would be collected by means of an increase in the current rates of NICs by 1.25 percentage points. In 2023/24 a formal legal surcharge of 1.25 per cent would replace the increase in NICs rates and apply to those working above State Pension age, while the underlying NICs rates would return to their previous level. Full details were set out in HM Government, Build Back Better: Our Plan for Health and Social Care, CP 506, September 2021; and, HM Treasury, Impact of “Building Back Better: Our Plan for Health and Social Care” on households, 7 September 2021.
In its Economic and Fiscal Outlook published alongside the Autumn 2021 Budget, the Office for Budget Responsibility (OBR) estimated that the Levy would raise around £12.4 billion a year for health and social care over the three years 2022/23 to 2024/25.
However, on 22 September 2022 the then Chancellor Kwasi Kwarteng announced that the 1.25 percentage point rise in NICs rates, implemented from 6 April 2022, would be reversed from 6 November. Mr Kwarteng also announced the Health and Social Care Levy would be cancelled.
What was the purpose of the new Levy?
Funds from the Levy were to be ringfenced for investment in health and social care. Further details were set out in the September 2021 policy paper, Build Back Better: Our Plan for Health and Social Care.
It was planned that £5.4 billion of revenue from the Levy would be used to support adult social care reform over three years from 2022/23 to 2024/25. This comprised:
- £3.6 billion to reform how people pay for adult social care in England, including a new £86,000 cap on the amount anyone will have to spend on their personal care over their lifetime. The means test for accessing financial support with social care costs would also be made more generous from October 2023.
- £1.7 billion to support wider system reform, including at least £500 million to support the adult social care workforce. Further details on the plans for wider reform were provided in a White Paper published on 1 December 2021: People at the Heart of Care: adult social care reform white paper.
Implementation of charging reforms
The legislation for a cap on care costs is already included in the Care Act 2014. The Government amended part of this framework (relating to how people who are in receipt of local authority funding progress towards the cap), through the Health and Care Act 2022, which received Royal Assent on 28 April 2022.
It was anticipated that primary legislation related to the cap would be commenced and the level of the cap and daily living costs would be set through statutory instrument subject to the affirmative procedure.
In July 2022 the Department of Health and Social Care announced that six “trailblazer” local authorities – Wolverhampton, Blackpool, Cheshire East, Newham, North Yorkshire, and Oxfordshire – would implement the reforms to how people pay for social care from January 2023 ahead of national rollout in October 2023.
On 23 September 2022 as part of the Government’s Growth Plan the then Chancellor Kwasi Kwarteng confirmed that although the Health and Social Care Levy would be cancelled, the additional funding for the NHS and social care services would “be maintained at the same level.” However, in his Autumn Statement to the House of Commons on 17 November 2022 the Chancellor Jeremy Hunt stated that the cap on care costs and the reforms to the means test would be delayed for two years, with the funding allocated “to allow local authorities to provide more care packages.”
Further information on the proposed changes to how people pay for social care is provided in the Commons Library briefing Proposed reforms to adult social care (including cap on care costs). It also provides brief information on the plans for wider reform. The briefing was updated on 22 November 2022, to take account of the announcement about social care reform in the Autumn Statement 2022.
More detailed information on the additional funding for the adult social care workforce is provided in section three of the Commons Library briefing Adult social care workforce in England.
How was the Levy introduced?
The Health and Social Care Levy Bill 2021-22 was introduced on 8 September 2021. The Bill, with its explanatory notes, was published on the Bill’s page on Parliament.uk, which also provides details of its consideration by Parliament. HM Revenue & Customs published an impact assessment of the Bill at the time (Health and Social Care Levy, 9 September 2021).
In their Business Statement on 9 September 2021 the then Leader of the House Jacob Rees-Mogg announced that all stages of the Bill in the House of Commons would be taken on a single day: 14 September. This procedure that is known as ‘fast-tracking’. The Government’s decision to ‘fast-track’ the Bill was addressed in an updated version of the explanatory notes to the Bill, published on 13 September (see Bill 160-EN (PDF), pp4-5). Subsequently on 14 September the House approved a motion for all of the Bill’s stages in the Commons to be taken that day, and the Bill was agreed, unamended (Votes and Proceedings No.47 (PDF), 14 September 2021).
The Health and Social Care Levy Act 2021 received Royal Assent on 20 October 2021. Subsequently the first stage of the introduction of the Levy took place on 6 April 2022, when the rates of NICs for employees, employers and the self-employed were increased by 1.25 percentage points. Prior to this, on 23 March the then Chancellor Rishi Sunak presented his Spring Statement to the House, and as part of this announced an increase in the thresholds for National Insurance for both employees and the self-employed for the coming year. Further details were set out in a factsheet published by HM Treasury (Spring Statement 2022: Personal Tax Factsheet, 23 March 2022). Statutory provision for this measure was made by the National Insurance Contributions (Increase of Thresholds) Act 2022.
The Government’s proposal to cancel the Levy
On 22 September 2022 the Chancellor Kwasi Kwarteng announced that the 1.25 percentage point rise in NICs rates for employees, employers and the self-employed would be reversed from 6 November 2022. In addition the Health and Social Care Levy would be cancelled.
To give effect to these changes the Health and Social Care Levy (Repeal) Bill 2022-23 was introduced the same day. The Bill, with its explanatory notes, is published on the Bill’s page on Parliament.uk, which also provides details of its parliamentary progress to date. In their Business Statement on this day the Leader of the House announced that the Bill would be ‘fast-tracked’, with all of its stages in the House of Commons taken on 11 October.
Subsequently on 11 October the House approved a motion for all of the Bill’s stages in the Commons to be taken that day, and the Bill was agreed, unamended (Votes and Proceedings No.50 (PDF), 11 October 2022).
The Health and Social Care Levy (Repeal) Act 2022 received Royal Assent on 25 October 2022.
The Treasury published a factsheet on the Bill (Reversal of the Health and Social Care Levy Factsheet, 23 September 2022). This noted that the increase in tax rates on dividend income, which were announced along with the Levy and took effect from April 2022, would be reversed from April 2023. The factsheet stated that “the Levy and increased dividend tax was expected to raise approximately £13 billion a year to fund health and social care. Funding for health and social care services will be maintained at the same level as if the Levy was in place.” As noted above, as part of the Autumn Statement 2022, the Government announced that it was delaying the rollout of adult social care charging reform from October 2023 to October 2025.
Commons Library briefing Health and Social Care Levy Act 2021, 6 October 2022 discusses the legislation which provided for the introduction of the Levy.
Commons Library briefing Health and Social Care Levy (Repeal) Bill 2022-23, 4 November 2022 discusses the Government’s legislation to abolish the Levy.
Further to this, Commons Library briefing National Insurance contributions: an introduction, 16 December 2019 provides an overview of the National Insurance system, and the reforms that have been made to it in recent years.
There will be a Backbench Business Committee debate on the provision of auditory verbal therapy taking place in Westminster Hall on Tuesday 12 December at 9:30am. The debate will be led by Sally-Ann Hart MP.
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