Andy Burnham has admitted that people in Britain could face further tax rises to help finance his ambitious social care plan.
The PM acknowledged that the controversial decision to scale back the state pension “triple lock” may not raise enough money to cover the cost. He also indicated that creating an NHS-style national care service could take several years.
He confirmed that the triple lock—which increases pensions annually by whichever is highest among inflation, average earnings growth and 2.5 per cent—would be scrapped if the party wins the next general election.
The change is forecast to reduce pension payments by an estimated £15billion a year by the end of the next decade.
However, economists have warned that the policy “won’t remotely pay” for the proposed social care system. The plan would cover personal care only, meaning some people could still be forced to sell their homes to meet residential care costs.
The Institute for Fiscal Studies think tank said that “cancelling an unfunded increase does not free up funds for a new Government commitment”.
Jonathan Cribb, the IFS deputy director, said: “Therefore tax rises or other spending cuts will be needed to pay for social care.”
Andy Burnham has acknowledged that further tax rises could be needed to fund his social care plan
The proposed state pension uprating changes are estimated to reduce payments by £15billion a year by the end of the next decade
Mr Burnham unveiled his plans for a “new settlement” on social care during a major vision speech at the Labour conference yesterday.
Care would be free at the point of delivery. In an emotional address, the premier said he wanted to overhaul the system in memory of his father, Roy, who died earlier this month after battling Alzheimer’s disease.
The announcement has prompted questions over whether it breaches Labour’s manifesto, while ministers have acknowledged that legislation would be required before the next election.
Speaking in a series of interviews after his conference speech, Mr Burnham accepted that the proposed National Care Service could face a funding “shortfall”.
He promised to be “honest” about where the money would come from, leaving open the possibility of tax increases.
Mr Burnham told Times Radio: “I will put a plan before the country at the next general election where we say this is our national care service, ‘this is how we will fund it’.”
He argued that a national care service would allow the NHS to make “cashable savings” through a more effective social care system.
He added: “And then if there’s a shortfall, well, we’d have to be honest about that shortfall and say where that money is coming from.”
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Mr Burnham also acknowledged that the timing of the rollout remained unresolved.
He told the broadcaster: “What I’ve announced at Labour party conference is the big vision—a national care service that can work to NHS principles because then you can have a system that works from home to hospital and back again, a more efficient way of providing care rather than two systems—and the big enabling decision that unlocks a national care service, which is the adjustment to the triple lock.”
An Institute for Fiscal Studies chart illustrates how state pension payments would be lower if the proposed uprating system had been in place since 2010
The premier said finding funds for the scheme could mean implementation is delayed.
‘You could obviously, if you wanted, put the time back, the date back, by which the service comes in,’ he said.
‘Because the triple lock decision will release the billions, more money will release as we go through the next decade, so there’s obviously a timing question there.’
He suggested 2040 would be too late ‘because the pressure on the NHS by that point – it’s already intolerable’.
Mr Cribb said the savings from altering the pension uprating were highly uncertain, and could be ‘anywhere between £4billion and £20billion’ a year by 2040.
The move could ‘easily save nothing’ by 2034-35, he added – stressing that as the state pension rises were unfunded they could not be used to account for new policy.
Mr Cribb added: ‘To give a sense of scale, if the government wanted to raise around £10billion to spend on social care, it could raise that by increasing the main of VAT by 1 per cent, or add 1 per cent to all rates of income tax.’
Paul Johnson, former head of IFS, said: ‘I think we will have to pay a significant additional amount of tax in order to pay for what is effectively a significant additional leg to the welfare state.’
Work and Pensions Secretary Pat McFadden told Sky News the triple lock will not end until 2030 – but suggested the Government will pass legislation to axe it before that.
Pressed whether the measure could be passed before the next election, Mr McFadden said: ‘Well, we’ll legislate before the changes come in.
‘We obviously have to do that.’
Asked whether that would ‘be a breach of’ the 2024 manifesto, Mr McFadden replied: ‘No, we’re keeping to our promise, which was to maintain the triple lock for the duration of this Parliament.
‘And in the future, pensioners should know that their pension will continue to rise every year either by prices or by 2.5 per cent whichever is the greater.
‘And there’ll also be an additional peg, which is why this is an adjusted triple lock, whereby we will take the proportion of the pension in relation to average earnings in 2030 and lock those gains in for the future.’
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