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Tax cuts appear to be the new direction of travel.  But where does that leave the Health & Social Care Levy?

The early stages of the race to be the next Prime Minister have been dominated by low taxation promises, a focus designed to appeal to the relatively small electorate that makes up the Conservative party membership. 

Yet the ramifications of such an approach extends to every person and business in the United Kingdom, and also presents employers and their Human Resources (HR) experts with some unwanted uncertainty.  Most notably around the still only partially progressed Health & Social Care Levy (HSCL).

So what is the HSCL, why is it important, and where are we now? 

The original proposal

Cast your mind back to September last year, and you will recall that the Prime Minister, and both his then Chancellor and Health Secretary, announced the introduction of an entirely new tax on earnings:  The Health & Social Care Levy.

That announcement was unexpected, and represented something of a change of direction from pre-pandemic manifesto commitments.  And the design of the HSCL is also unusual, as the new levy will only fund two specific national concerns.

Waiting lists

The first of those issues is the National Health Service (NHS).  Most of the money raised in the early years of the levy is earmarked to reduce those record-high national waiting lists for diagnosis and treatment. 

This is a big challenge, but hopefully a relatively transitory one as the nation and its health service recovers from the pandemic.

Care costs

The same cannot be said of the other issue, the costs associated with long-term care. 

Now any individual might require such care, yet the costs of such support are really significant.  Indeed it is not unusual for those receiving care to have to sell their home to raise sufficient funds, and sometimes even those reserves are exhausted, with family members then forced into difficult decisions as to how (or even if) care can continue.

This has long been recognised as a major problem for the United Kingdom, and accordingly senior figures in both Westminster and Whitehall have sought a sensible and practical response.  The first step towards that goal being the 2011 Dilnot report which found:

“the adult social care system was not fit for purpose and required more funding – both from individuals and the state – for it to be sustainable…the report highlighted the need to find a fairer way of sharing the costs and responsibilities for the provision of adult social care services.”

Since when political stalemate, missteps, and misfortune have prevented any unified response arising from government.    

The HSCL

Until the Health & Social Care Levey was announced last year.

It should however be noted that the HSCL is certainly very far from a perfect solution to the challenges of care costs, and probably only represents the first step in the journey towards a fairer and more sustainable system.  Yet the first step in any journey is often the most important one.

Sadly, even this limited progress might now be under threat if the government is to change taxation policy again.  This is certainly possible, not least because several of the Conservative leadership candidates have already indicated their willingness to reverse the 2022/23 increase in National Insurance (NI) contributions.

NI or HSCL?

The NI increase was however only ever a temporary measure for the 22/23 tax year, designed as an initial tax gathering tool until the Health & Social Care Levy could officially began in April 2023. 

This apparent confusion between NI and HSCL presents something of a political grey area that Prime Ministerial candidates could perhaps utilise for campaigning purposes.  Indeed, it would be quite possible to reverse the NI increase this tax year (thus keeping a campaign promise) whilst still introducing the full HSCL from April 2023.

For the moment the jury is out on whether the HSCL happens next year, at a later date, in another format, or is retired before it even officially begins. 

This latter option might be rather difficult for any new Prime Minister to justify, given that most Conservative MPs only recently voted for the introduction of the HSCL.  It is also worth noting that resolving the care costs issue is generally seen as a high priority by the national electorate, and in particular Conservatives voters.

So any number of outcomes remain possible at this stage.

Where does this leave employers?

None of which helps employers and their HR experts right now.  To my mind there are four issues here:

  • Will it happen?

Employers need to know what lies ahead, not least because the NI/HSCL cost is significant, and whilst the recent NI threshold increase has helped employees, employers have not benefited from any saving.  This is problematic, particularly at a time when employers are facing massive inflationary pressures.

  • When?

If the HSCL is to happen, will the start date still be April 2023?  The new Prime Minister and his or her new ministerial team will not be in place until early September, leaving limited time to implement any new plans.

  • Salary Sacrifice?

Another question is whether employers can utilise Salary Sacrifice to mitigate the HSCL increase.  Such options are actively being used by savvy employers to offset some of the concerns around the NI cost increase this year, but whether that mechanism can be used alongside the HSCL remains far from clear.

  • A new employee benefit?

In the event that HSCL does go ahead, will there be room for insured employee benefit solutions to help meet the employee element of care costs?  Such a scheme could prove attractive as a recruitment and retention tool, but progress cannot begin until the final HSCL parameters are established.

Sadly, it appears that Human Resources experts will now have to wait until after the summer for the answer to these important questions. 

Steve Herbert is Wellbeing & Benefits Director at Partners&

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