Prime Minister Andy Burnham is initiating a review of the social care system, aiming for a cross-party consensus on reforms and a 'big conversation' with the public about its future. This move has revived discussions around funding models, specifically raising concerns about a potential new levy that critics have dubbed a 'death tax.'
Attempts to reform social care, which is currently a complex system where individuals with assets above £23,250 can face significant costs, have faltered for two decades. Past proposals, including a National Care Service funded by inheritance tax under Gordon Brown, were shelved. A 2011 review by Sir Andrew Dilnot suggested a lifetime cap on care costs, which the subsequent Conservative government adapted with a higher cap and the 2014 Care Act, though it was never fully implemented. Later efforts by Theresa May and Boris Johnson to cap costs faced political backlash and funding challenges, with subsequent governments delaying implementation.
Burnham's current initiative seeks to address what he described as a 'dereliction of duty' by previous administrations. He emphasized the personal impact of care costs, noting that individuals can see their life savings depleted by the expense.
However, the need for funding reform has led to renewed debate about a potential 10% levy on all estates to finance a National Care Service. This has sparked worries of double taxation, particularly if such a levy were introduced alongside existing inheritance tax. Some commentators argue that a new social care tax could impact smaller estates currently exempt from inheritance tax, while simultaneously reducing the burden on larger estates by potentially replacing the 40% inheritance tax. The prospect of a 10% social care tax, a 40% inheritance tax, and income tax on inherited pension pots has been highlighted as a potentially problematic scenario.
To preempt speculation and potential public opposition, there is a call for immediate clarity regarding inheritance tax rules and a commitment to avoid taxing the same assets multiple times. The aim is to ensure that necessary social care reforms are not stalled by tax-related controversies.