Do We Need a Death-tax to Fund Social Care?

James Taylor April 28, 2017 1
Do We Need a Death-tax to Fund Social Care?

‘We need a death-tax to fund social care.’

So says Camilla Cavendish – that’s Baroness Cavendish of Little Venice to you and me – a prominent former policy advisor to David Cameron and a non-executive board member of the CQC.

Speaking on the BBC’s Newsnight this Tuesday, Ms. Cavendish said that ‘we need creative solutions to our care crisis.’ The Japanese example, where all over 40’s pay a levy to fund their old age care would be too slow in coming to fruition, while raising National Insurance could become a ‘tax on jobs’ especially in the face of Brexit uncertainty.

Instead Camilla Cavendish ironically recommends the revival (no pun intended), of what the Conservatives formerly dubbed the ‘Death Tax’ and a ‘RIP off’ when Labour proposed the policy back in 2009-10.

This is an irony Ms. Cavendish freely acknowledges and it should be noted that as of December 2016 she has been not affiliated with any political party.

The ominously named ‘Death Tax’ is in fact nothing more than an increase in inheritance tax. Back in 2009-10 Labour’s Andy Burnham wanted to use a 10 per cent levy on top of inheritance tax to fund a ‘National Care Service’ in line with the National Health Service, a proposal which saw limited traction but which looks profoundly prescient from our position in 2017.

In 2012 Andrew Lansley, then Conservative Secretary of State for Health, put forward the idea of raising funds for care through inheritance tax, which was rejected by then Conservative head honchos Cameron and Osborne. The Barker report into health and social care also called for a review of property and wealth taxation in 2014 – again no action in this area was taken.

Currently any part of an estate passed on after death which is under £325,000 is not taxed, while anything over that amount is taxed at 40%. Anything left to spouses will not be taxed, while if the estate is given to children or grandchildren the threshold increases to £425,000.

Would the Tories increase inheritance tax?

Well, bluntly the answer appears to be no. Mrs May and Chancellor Phillip Hammond have previously ruled out an inheritance tax hike to fund social care, probably in fear of losing support from wealthy elderly people and their next of kin who would stand to lose out after mum or dad departs to the hereafter.

Mrs. May also ruled out a general election in 2017 – and look at where we are now. However the decision to call the election was tactical, as is the decision to steer clear of increasing inheritance tax, at least in any direct and headline grabbing way.

Instead, while Theresa May this week spoke in South Wales sounding like a Brexit behemoth imploring the British public to ‘make me stronger!’ she also said that “we need to stop ducking the issue” of social care.

Mrs. May said “we are and have been already working on a long term solution and that’s what we need in this country. We need to ensure we have got that long term solution for a sustainable future for social care.” However, the Prime Minister refused to confirm whether social care funding would appear in her party’s manifesto which will be published in May.

Will Labour increase inheritance tax?

No other party has made any indication that they would raise inheritance tax if elected. While to do so would not be out of line with current Labour messaging, the party knows that the Conservatives would gleefully jump on any Labour proposal to tax the estates that people pass onto their loved ones when they die, regardless of how high the proposed thresholds for what is and is not taxed are.

Having said that, two weeks ago Jeremy Corbyn announced a £10-a-week increase to the Carer’s Allowance – payments made to people who care for elderly and vulnerable relatives, to bring the allowance up to £73 a week and in line with Job Seekers Allowance. In order to fund this, Mr Corbyn said they would scrap recent Conservative cuts to inheritance tax.

Shadow care minister Barbara Keeley will say: “Unpaid carers play a vital role in our society and that role is too often ignored. There are an estimated 6.5 million unpaid carers in Britain providing care and support for family members and friends.

“Our health and care system would not manage without the care that they provide. Without them, millions of people would have to manage without any support at all.

“Labour believes that we should find ways to improve support to people who themselves give so much unpaid support to family members and friends.

“This small increment, funded by reversing a Tory tax cut for the rich, is the first step on the road to creating a care and support system fit for all those who need it. It will go some way to alleviate the financial burden that many family carers experience.”

Might Labour go a step further and make a manifesto pledge to fund social care by increasing inheritance tax? Like the Conservatives, they need to show not only that they will increase social care funding but also how they will do this. Given that they are using corporation tax rises to fund many projects already, if they don’t use inheritance tax then we may see some seriously imaginative (or alternatively entirely unworkable proposals).

Concrete proposals on any further increase in social care funding remain to be seen, if any end up being revealed at all. Mercifully given this snap election cycle we shouldn’t be waiting too long to find out.

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