Andy Burnham has hinted that tax rises could one day be needed to pay for his social care reforms.
Speaking at a care centre in north London on Wednesday, the Prime Minister said he wanted social care to run “on the NHS principle” – free at the point of use, based on need rather than income.
However, he admitted that getting there may require “difficult decisions” later in the Parliament.
Burnham blamed his own generation of politicians for the social care crisis, calling it a “major dereliction of public duty” and a “shameful” failure to act, pointing to Age UK’s estimate that around two million over-65s are not getting the care they need.
However, research by The Health Foundation has estimated that an NHS-style system could cost £18.7bn a year by 2035.
No funding mechanism has been confirmed, and Downing Street has said any decision will await the findings of Baroness Casey’s independent commission on adult social care – now due a year earlier in 2027.
Here are some of the options Burnham could consider, and how politically risky they are.
A tax on all estates after death
Burnham’s preferred option, according to The Times, is a new levy on all estates after death.
This would replace inheritance tax, which currently applies at 40 per cent on the value of an estate above £325,000 – with various reliefs available.
As health secretary under Gordon Brown in 2009, Burnham proposed scrapping that threshold in favour of a flat 10 per cent levy on all estates to fund a National Care Service, which would be free at the point of use.
The idea proved controversial, with the Conservatives branding it a “death tax” at the 2010 election.
However, it is this flat-rate levy which – 17 years later – may be an option to fund his plans for social care.
Inheritance tax raised £8.25bn in the 2024-25 tax year, though fewer than one in 20 estates triggered a charge – less than half the £18.7bn that The Health Foundation estimates an NHS-style system would cost.
Burnham suggested any tax rises would come later in the Parliament rather than immediately, saying: “I think firstly you have to do more with what you’ve got, but… some of what we would want to do in the fuller sense will require difficult decisions.
“But we will be honest with people about those, we will put them before the country at the right time.”
Political risk – 5/5: The “death tax” label and its controversial history could prove challenging for Labour. Sarah Woolnough, chief executive of the King’s Fund, has warned Burnham not to go “straight to a funding model discussion,” as it risks “the ‘death tax’ doom loop” where reform becomes only a conversation about cost. Reform UK has said it would “fight a death tax every step of the way.”
A levy on wages
A second option, revealed by The Telegraph, has reportedly been drawn up separately by civil servants at the Department for Health and Social Care.
It would introduce a mandatory levy of 1.8 per cent on earnings above £6,240, paid by workers over 34 into a fund invested on their behalf to cover care costs in old age.
Wealthier retirees would also contribute between 10 and 45 per cent of their own costs, depending on their assets.
The model mirrors social insurance schemes in Germany and Japan. It was first proposed in April by Re:State, a think tank which Burnham has previously advised.
Its paper estimated the levy would cost an employee earning £50,000 an extra £788 a year, rising to £1,327 for someone on £80,000.
Political risk – 4/5: A new payroll deduction would sit awkwardly with Labour’s manifesto pledge not to raise taxes on working people, even if it avoids the toxic “death tax” branding. It is not clear how much the levy would raise overall. When asked about potential tax rises to fund changes to the social care system, Burnham has said he will stick to Labour’s manifesto.
Cutting spending elsewhere
Rather than raising new revenue, the Government could try to fund social care by reallocating money from other budgets. After his speech, Burnham told reporters that “more is possible from within existing resources”, while insisting his workforce pledge would be “fully funded”.
He said: “I think we owe it to the public before we talk about tax rises… you first have to look the public in the eye and say are we doing everything we can do from within what we’ve got.”
But the scale of that challenge became clearer the same day, when the National Institute of Economic and Social Research (NIESR) warned that the Chancellor, John Healey, faces a £24bn hole in spending plans by 2029-30, as inflation erodes budgets faster than expected.
That figure is what the Government needs to find just to hold existing spending plans in place – before any new money is found for social care.
NIESR’s director David Aikman said: “Our message is direct. Those commitments must be funded through taxation or savings elsewhere, not through more borrowing.”
Its deputy director Stephen Millard suggested scrapping “the very expensive triple lock on pensions,” cutting welfare spending, and updating council tax valuations, which date back to 1992, rather than raising headline tax rates.
Against that backdrop, funding social care reform through reallocation alone would mean finding reductions on top of the £24bn already needed, at a time when the NHS, schools and defence are all competing for the same money, and Healey has only £3.7bn of headroom against his fiscal rules at the autumn Budget.
Political risk – 4/5: It would pit social care directly against other protected priorities, and Labour has already faced backbench resistance over welfare and departmental cuts.
A less radical, cheaper option
Instead of a full NHS-style system, Burnham could opt for a cheaper model.
One option is emulating Scotland, where personal care – help with washing, dressing and eating – has been free regardless of wealth since 2002, while residents still pay for accommodation and other costs. If adopted UK-wide, the Health Foundation estimates this would cost around £6bn extra in 2026-27, rising to £7bn by 2035-36.
Another is a cap on lifetime care costs, recommended by the economist Sir Andrew Dilnot in 2011 and legislated for in 2014, but never implemented. People would pay for their own care as now, but once costs reached a set threshold, the state would take over.
Labour scrapped a version of the cap, set at £86,000, in 2024. The Institute for Fiscal Studies said the decision meant “the risk of extremely high social care costs” would “remain with individuals.”
A third, cheaper option still would be to raise the £23,250 asset threshold above which people get no state help with care costs. Frozen since 2010, raising it would let more people qualify for support without a full overhaul.
Political risk – 2/5: These options fall short of Burnham’s stated ambition and could be criticised as another incremental fix, but they carry none of the “new tax” attack lines. However, Woolnough has suggested Burnham could offer free personal care as “a first stage… a stepping stone to a more general system”.
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