Andy Burnham’s plans to fund a £18.5bn National Care Service through a possible “death tax” have been called into question after experts warned he would struggle to raise the money.
The Prime Minister gave the strongest hint yet on Wednesday that he would have to put up taxes to fund a new National Care Service when he said the public should be prepared for “difficult decisions”.
While no decisions on funding will be made until Baroness Casey completes her review on social care next year, one option Burnham backed before he entered Downing Street was a new “national care levy” of 10 per cent imposed on people’s homes when they died, which critics have branded a “death tax”.
Under this proposal, the 10 per cent levy would replace the existing inheritance tax rate of 40 per cent on estates above a threshold, with certain allowances and exemptions in place.
The plans are controversial because inheritance tax is currently only paid on 6 per cent of estates, while the 10 per cent rate would be universal, meaning hundreds of thousands more families a year would be liable and be faced with burdensome administration.
But experts have warned scrapping inheritance tax and introducing a new levy would also be revenue neutral at best, leaving no more money to fund social care without cuts to other services.
It would potentially raise around £9bn a year, which is only half of the £18.5bn the Health Foundation think-tank calculates would be needed to fund a National Care Service for everyone in England who needs social care, free at the point of use.
Stuart Adam, a tax expert at the Institute for Fiscal Studies, suggested that a 10 per cent levy could raise up to £9bn a year, but that this figure could be a lot less because it did not take into account behavioural responses such as people handing over their homes to their children to avoid paying the tax.
He stressed that the figures were only hypothetical calculations because they were based on a policy that had not been formally proposed.
Adam said the HMRC calculates that each percentage point of inheritance tax above the current rate of 40 per cent raises £300m in revenue, suggesting that a 10 per cent levy would raise £3bn from those estates already subject to tax.
The HMRC also says the revenue foregone due to the nil rate band – for homes under the current threshold of £325,000 – was £24bn, before any behavioural response.
Adam said this is based on a theoretical tax rate of 40 per cent – if inheritance tax were applied on homes below £325,000 – and so a 10 per cent rate on that revenue would be a quarter of this, at £6bn.
Putting the £3bn and £6bn together would lead to hypothetical revenue from a 10 per cent tax rate of £9bn.
Adam said: “This is roughly the same amount as inheritance tax currently raises, so it would be revenue neutral and not very good for funding social care.
“That is even before any behavioural response and not taking into account the nil rate band for people’s homes and bequests to spouses.”
He added: “Only 6 per cent of estates are currently subject to inheritance tax.
“So if you are talking about a new 10 per cent tax with no threshold, everyone who died would owe a tax. That is an extra administrative and record-keeping burden. I would be quite surprised if there was a tax on estates with no threshold at all.”
Setting out early plans to speed up social care reform on Wednesday, the Prime Minister said it would be “possible from existing budgets to do much more” but also strongly hinted that tax rises would be on the cards.
He said: “I think firstly you have to do more with what you’ve got, but I think Louise [Casey] indicated 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 and we will hopefully proceed with people’s consent.”
Burnham’s comments have sparked suggestions that he may seek a fresh mandate, in Labour’s next general election manifesto, for tax rises to pay for social care.
The Health Foundation has also calculated that a narrower model of reform than a full National Care Service, such as providing at home personal care to people who needed it along the lines of the policy in Scotland, would cost around £6.5bn a year.
This could in theory be paid for by a new 10 per cent levy but it would stop short of Burnham’s pledge for a fully fledged National Care Service, which would extend to things like accommodation in care homes.
Burnham may try to avoid a controversial “death tax” and choose other new levies or rises on existing taxes.
The Daily Telegraph reported that civil servants were looking at a 1.8 per cent levy on incomes over £6,240 for people over 34.
However Casey on Wednesday rebuffed suggestions of a “whole new tax” to fund a new care service.
She told Radio 4’s Today programme: “Incidentally … [the public are] already paying for it. So this idea that somehow somebody’s going to come along and say: ‘Hello, here’s a whole new service and a whole new tax,’ is just kind of cloud cuckoo land.”
Hence then, the article about the hidden flaws in a death tax to pay for a national care service was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( The hidden flaws in a ‘death tax’ to pay for a national care service )
Also on site :
- 1985 Hit Novel, Written By a 21-Year-Old, Was Inspired By an Elvis Costello Song
- Beloved Romance Author Wants to Turn Jen Hamilton's Divorce Into Her Nex Best Seller — Under One Condition
- Netflix's 'The Idaho Murders: College Nightmare' Reveals These 10 Disturbing Details About the Bryan Kohberger Case