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Introducing a health and social care tax

The Health and Social Care Levy Act 2021 was introduced on 8 September 2021 as the Health and Social Care Bill 2021-22. It received Royal Assent on 20 October 2021, and it came into force on 6 April 2022.

In a statement to the House on 7 September 2021, then Prime Minister Boris Johnson announced plans to substantially increase funding for health and social care for a three-year period from 2022/23 to 2024/25, to be funded by a new tax: the Health and Social Care Levy.

The Levy is based on National Insurance contributions (NICs), which are paid by employees, employers and the self-employed. Most NICs payments go into the National Insurance Fund, to pay for contributory benefits (primarily the State Pension). A single portion of the income from NICs is not paid into the fund, but is allocated to the National Health Service.

The plan to introduce the Levy contained two stages. The first stage was implemented at the beginning of the 2022/23 financial year, and the second was due to be implemented in 2023/24:

  • On 6 April 2022, the rate of primary Class 1 NICs for employees charged on their earnings, the rate of secondary Class 1 NICs for employers charged on their employees’ earnings, and the rate of Class 4 NICs for the self-employed charged on their trading profits, was increased by 1.25 percentage points.
  • In 2023/24 a separate levy set at 1.25% was planned to be introduced, replacing this temporary increase in NICs rates. People in employment who were over State Pension age would also have been liable to pay the levy. At present, pensioners are not liable to pay NICs on any earnings they receive from employment.

The Health and Social Care Levy Act provides for the temporary increase in NICs rates for 2022/23, and its replacement with the Levy from April 2023.

The Act also makes provision for the Treasury to determine how the money raised from the Levy is allocated between health care and social care, and the amounts to be split between England, Wales, Scotland and Northern Ireland. NICs is not a devolved tax. The Act extends and applies to the whole of the UK.

Statutory provisions regarding NICs are not included in the annual Finance Billso changes to National Insurance in recent years have been made by the introduction of relatively short bills (for example, the National Insurance Contributions Act 2014, and the National Insurance Contributions Act 2015).

Financial impact

The Government’s health and social care plans were set out in detail in a Command Paper published alongside the Prime Minister’s statement. This estimated that the Levy would raise an additional £11.4 billion a year for health care and social care, for the three-year period 2022/23 to 2024/25.

The Office for Budget Responsibility (OBR) published a revised estimate in its Economic and Fiscal Outlook which accompanied the Autumn Budget in October 2021. It anticipated that the Levy would raise around £12.4 billion a year for health and social care in 2023/24, rising to £13 billion in 2026/27.

Parliamentary procedure

Following Boris Johnson’s statement on 7 September 2021, then Leader of the House Jacob Rees-Mogg announced that the House would consider a motion to approve a Ways and Means Resolution, to enable the Government to bring forward legislation to introduce the Levy.  This was approved on 8 September, after which the Health and Social Care Levy Bill was published (Votes and Proceedings No.43, 8 September 2021 – PDF). In the Business Statement on 9 September 2021, Mr Rees-Mogg said all stages of the Bill in the House of Commons would be taken on 14 September, as announced on Twitter on 9 September.

A Commons Library briefing on public bills receiving their second and third readings on the same day, provides a list of examples of public bills being ‘fast-tracked’ in this way. Another recent example of expedited legislation in the field of tax law was the Stamp Duty Land Tax (Temporary Relief) Act 2020. This introduced a temporary relief for residential house sales, as part of a package of measures announced by then Chancellor Rishi Sunak in June 2020 to boost job creation in the context of the Covid-19 pandemic. Initially the Government’s decision to ‘fast-track’ the Health and Social Care Levy Bill was not addressed in the explanatory notes, published alongside the Bill on 8 September 2021. An updated version of the notes, with an additional section relating to fast-track legislation, was published on 13 September 2021.

In turn, on 14 September 2021 the House approved a motion for all of the Bill’s stages in the Commons to be taken that day, and the Bill was agreed, unamended (Votes and Proceedings No.47, 14 September 2021HC Deb 14 September 2021 cc837-947). Following its first reading in the House of Lords on 15 September, the Bill went through its second and third readings on 11 October, after which it was passed. The Bill received

The Health and Social Care (Repeal) Bill 2022-23: Autumn 2022

On 23 September 2022, Chancellor Kwasi Kwarteng announced that the Government would repeal the Health and Social Care Act 2021, in line with campaign pledges made by Prime Minister Liz Truss during the 2022 Conservative leadership race. The Health and Social Care (Repeal) Bill 2022-23 was introduced on 22 September 2022. The Bill, alongside its explanatory notes, can be found on the Bill’s page on The Commons Library briefing paper on the Health and Social Care Levy (Repeal) Bill 2022-23 provides more detailed information.

On 22 September 2022, Leader of the House Penny Mordaunt announced that all stages of the Health and Social Care (Repeal) Bill, would take place on Tuesday, 11 October 2022, following the same fast-track procedure used for the Health and Social Care Act 2021.

Further reading

Several Commons Library briefings provide further background to the Government’s plans for health and social care:

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