Michael Burton 11 November 2020

Think tank calls for new health and social care tax

A new health and social care tax raising £17bn should be the centrepiece of sweeping tax increases to raise £40bn a year, according to a new report from think-tank the Resolution Foundation.

The report proposed a 4% flat-rate health and social care levy paid above £12,500 that would apply to all forms of income, including capital gains, and to most people, including pensioners.

As this would be coupled with a 3% cut in national insurance contributions (NI) employees on incomes below £19,500 would be better off.

Some £17bn would be raised, with £6bn set aside for social care, and in the long run it could replace NI altogether.

The report read: ‘This approach would deliver a large fraction of the necessary consolidation in a highly progressive way and support broader national challenges that have been put into stark relief by the pandemic.’

It said council tax should be replaced by a new property tax based on up-to-date valuations, with a supplement of 1% on properties over £2m raising £1.4bn.

The report argued that ‘fiscal consolidation’ of £40bn annually should only begin in 2024/25 and should be achieved through tax rises rather than public spending cuts as the latter is less practical after a decade of austerity.

It added: ‘There is a consensus that cutting government spending has a larger negative impact on the economy than increasing taxes.’

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