Businesses must respond fairly to UK social care levy

Industry responds to UK government’s 1.25% health and social care tax announcement


ESG Clarity

Industry members have responded to the announcement from UK prime minister Boris Johnson this week  that a new ‘health and social care levy’ of 1.25% will be introduced, saying it is companies’ moral responsibility to absorb the costs.

The prime minister said the so-called social care tax will raise £36bn in the next three years to help fund long-term care reforms, seemingly replacing the government’s rumoured national insurance hike.

See also: – AIC looks at care in the community

Dividend tax was also put up by 1.25% and an £86,000 lifetime cost cap on care bills introduced, excluding accommodation, cleaning and food.

The announcements should ensure “businesses contribute to the new health and social care levy,” said Shaun Moore, tax and financial planning expert at Quilter, with the dividend tax hopefully also ensuring the burden isn’t placed all on younger workers.

But investors should check businesses do not end up indirectly passing the rise onto their employees. “In a time when so many are under pressure, it would be disheartening to see hard working people effectively get hit twice as companies seek to reduce their own burden,” commented Rev Dr Andrew Harper, head of ethics at Epworth Investment Management.

“Sure, many companies, especially small businesses, are too under pressure, but for companies that can afford to absorb these costs, it is really their moral responsibility to do so.”


The fairness of these plans, which break the Conservative’s manifesto promises, has been also been questioned by industry commentators.

“The bulk of the working population are still under state pension age, meaning in reality this is a national insurance hike in all but name and it is almost certainly still younger people who will pay the lion’s share of these costs,” said Tom Selby, head of retirement policy at AJ Bell.

He added the move had been unpopular with voters, with less than one in six (15%) saying they would support an increase in national insurance to fund social care reform.

“Increasing dividend taxation feels like a last-ditch attempt to convince voters that all sections of society are sharing responsibility for funding social care reform,” he said.

Nigel Peaple, director of policy and advocacy at PLSA, added: “It is clear the debate about the fairness of the proposals will continue for some time to come.”

The social care crisis in the UK will be familiar to many ESG investors, with the industry helping to plug funding gaps with social impact products.

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