Prime Minister Andy Burnham is facing significant criticism over a potential plan to introduce a 10% levy on all inheritances to fund social care. The proposal, which has been previously floated by Burnham, has been dubbed a 'death tax' by opponents who argue it would unfairly impact families.
Robert Jenrick, Treasury spokesman for Reform UK, stated that the levy could increase the number of families paying inheritance tax by twentyfold. He expressed concern that such a tax would affect those with modest estates, including bungalows and ex-council flats, not just wealthy individuals. Jenrick asserted that the Labour party, of which Burnham is a part, lacks a mandate for this idea as it was not included in their manifesto. He suggested that if the Prime Minister wished to implement such a significant policy, he should first call a general election.
Burnham, however, maintains that major changes to the social care system are necessary and that he aims to implement them before the next general election, which must be held by August 2029. He has spoken movingly about the personal impact of the social care crisis, referencing his father's admission to a care home due to Alzheimer's. The Prime Minister intends to accelerate reforms, with a review led by Baroness Casey to be fast-tracked to enable changes before the end of the decade. Burnham has previously stated his commitment to addressing social care issues, which he describes as 'broken' and a contributing factor to the pressure on the NHS.
While Burnham has indicated his desire for cross-party agreement on a lasting solution to the care crisis, he has so far avoided specifying how the estimated £18.5 billion annual cost will be met. He has previously suggested incorporating social care into the NHS as a national care service, free at the point of use, and has consistently advocated for a social care levy.
Kemi Badenoch, a Conservative leader, has expressed willingness to collaborate with Burnham and other parties on social care reform but cautioned against new taxes. She emphasized that any solution must be funded through spending cuts and should not penalize individuals who have saved for their own care. Badenoch warned against increasing taxes or borrowing, which would burden future generations.
Currently, estates below £325,000 are exempt from inheritance tax, with this threshold rising to £500,000 if a family home is passed to children or grandchildren. Couples can combine allowances, potentially passing on up to £1 million tax-free. Inheritance tax is levied at 40% on assets exceeding these thresholds, though tax avoidance measures are common among the wealthy. Under Burnham's proposed levy, even inheritances of a few thousand pounds could be subject to a 10% tax.
Reform UK estimates that the levy could generate £20.5 billion by 2028, but this figure would decrease to £11 billion if inheritance tax were abolished concurrently. Some sources suggest that eliminating inheritance tax while introducing the levy would disproportionately benefit billionaires while increasing taxes for working people, making it politically unviable.
As an alternative, Steve Rotheram, an ally of Burnham, has suggested considering a wealth tax to fund social care. The Health Foundation think-tank projects that the state covering all adult social care costs in England, similar to an NHS model, would cost £18.5 billion annually by 2035, in addition to existing expenditures.