On 11 October 2021, the House of Lords is due to consider the Health and Social Care Levy Bill at second reading and remaining stages.
The bill would provide for a new tax dedicated to helping fund the Government’s plans for health and social care, with proceeds ringfenced for this purpose. The new ‘health and social care levy’ would be based on a 1.25% increase in the main classes of national insurance contributions (NICs). The levy would be introduced in the 2023/24 tax year, after temporary transitional arrangements to increase NICs rates by the same amount in 2022/23 to allow for systems to be updated. The bill would give the Chancellor discretion to determine the share of proceeds from the levy allocated between health and social care and to each of the UK’s constituent nations. An increase in dividend tax rates, running alongside the levy and expected to raise additional funds for the plans, is set to be legislated for separately in the next Finance Bill.
The bill was introduced in the House of Commons as a supply bill, founded on a ways and means resolution debated and agreed on 8 September 2021. The Commons then considered the bill at second reading and remaining stages on 14 September 2021, before passing it without amendment.
The Government had set out its plans for health and social care in a command paper, entitled Build Back Better: Our Plan for Health and Social Care, published a day earlier on 7 September. The Government intends to consult on some of the proposals in this document in October 2021, with a white paper on social care reform following later in the year.
The House of Lords may pass or reject supply bills, but the House of Commons deems amendments to such bills to be an “intolerable breach of privilege”. In addition, the Speaker of the House of Commons has certified the bill as a money bill. This means the bill can be presented for royal assent to become an act if the House of Lords does not pass it without amendment within a month.
The Government has justified fast tracking the legislation as follows:
The legislation is required to be in place for the 2022/23 tax year, which starts on 6 April 2022. The increase in national insurance rates for that year will require changes to be made to the systems of employers and HMRC (including those designed to facilitate pay as you earn [PAYE]). To help ensure that people are not over or under taxed it is important for both those employers and HMRC to have as much time as possible to implement the changes. This is particularly important given all employers in the UK liable for NICs will be affected.