Boris Johnson’s manifesto commitment-busting tax hike has been criticised for being unfair across the generations and offering more benefits to wealthy southern households.
The Resolution Foundation think tank acknowledged the Prime Minister had grasped the issue of addressing adult social care which had been ducked by previous occupants of No 10.
But the majority of the money raised in the first three years of the package is intended for the NHS and the think tank raised concerns about the way it will be funded.
Health Secretary Sajid Javid said the decision to abandon the election pledge in order to provide £12 billion extra a year for the NHS and adult social care was the sign of a “responsible and serious government”.
But he acknowledged the extra money may not be enough to clear NHS waiting lists.
The new health and social care levy will be based on increased national insurance contributions and caps the total lifetime cost of care in England at £86,000 from October 2023.
The Resolution Foundation, a think tank focused on living standards, said the new system was generationally unfair because the bulk of the money comes from working age people.
Although the levy will hit the earnings of working people above retirement age from April 2023, the think tank said only one-in-six pensioner households have earnings.
In contrast, two-thirds have private pension income that is exempted from the levy.
The levy also excludes other sources of income such as rental income from buy-to-let homes.
The think tank said the £86,000 cap on care costs will be of most benefit to those in the more affluent south of England because not only will they see a greater share of their total assets protected by the cap, higher care costs mean they are also more likely to reach the cap and then receive state support.
But poorer parts of England could benefit from the new means test – which sees care costs covered for those with assets under £20,000, and help available to those with up to £100,000.
The think tank said in the North East only 29% of individuals aged over-70 have sufficient assets that they might receive no state support, compared with almost half in the South West.
But the think tank warned that many people might still need to sell their home to pay for care if they do not have significant other assets.
Resolution Foundation chief executive Torsten Bell said: “The Prime Minister has turned his back on low taxes in favour of an NHS-dominated state.
“But while this new strategy fits well with the reality of a rapidly-ageing, and austerity fatigued, 21st century Britain, the PM’s new plan raises some major questions of fairness.
“The tax rises that will pay for a bigger NHS are generationally unfair, excluding rich retirees while prioritising wealthy landlords over their tenants.
“And while the social care cap will prevent people being hit with catastrophic costs, it will benefit southern households far more than those living in Red Wall seats.”
“As Health and Social Care Secretary, I can certainly point to the huge challenges – fair to say the biggest challenges in our lifetime – that the NHS and social care have faced.
“As a government you can either stand back and leave it as ‘business as usual’, or you can address it and help tackle these challenges.”
He said that “doggedly” sticking to the manifesto commitment could have led to 13 million people being on NHS waiting lists in three years’ time as a result of the backlog built up during the pandemic.
Asked if the money would clear the backlog, Mr Javid told Sky News: “No responsible health secretary can make that kind of guarantee.”
He added: “What I can be absolutely certain of is that this will massively reduce the waiting list from where it would otherwise have been.”
The measures announced on Tuesday will see taxes at their highest-ever sustained share of the economy, the Institute for Fiscal Studies economic think tank said.
Writing in The Daily Telegraph, Mr Javid said he appreciates the tax hike “does not sit easily with everyone”, but “no responsible government, especially a Conservative one, can bury its head in the sand and pass these problems on to the next one”.
He insisted the Conservative Party remains “the party of low taxation”, telling the BBC the overall tax burden was around 35.5% of gross domestic product – a measure of the size of the economy – which was lower than France, Italy or Germany.
“We are still a low-tax country after this change, and we will always remain a low tax country,” he told Radio 4’s Today programme.
Ahead of a vote on the plans on Wednesday, Mr Johnson is expected to address the influential 1922 Committee of Tory MPs in a final effort to sell the package.
Reports suggested some Cabinet members had privately challenged Mr Johnson when he unveiled his plan to them on Tuesday, but none have resigned over the principle and there was limited criticism among the Tory rank and file after the package was set out.
Conservative backbencher Richard Drax said “as Conservatives, broken pledges and tax rises should concern us” and called for a “radical review” of the NHS to ensure the money did not disappear into a black hole.
Another backbencher, Stephen McPartland, indicated that he could not support the Government’s plan for social care without more detail.