This post is from The King's Fund Blog
In 1972, Richard Nixon visited the People’s Republic of China, reversing years of US policy. His anti-communist credentials enabled him to do something other politicians shied away from for fear of being labelled soft on communism. Are we about to see a ‘Nixon goes to China’ moment for social care? One that will see David Cameron, George Osborne and Andrew Lansley forced to eat a red rose?
Well, just possibly. Reports suggest that Theresa May and Philip Hammond are looking at funding at least some social care costs by making a claim on people’s estates once they have died – a form of inheritance tax, or, as the Conservatives usually dub it, a ‘death tax’.
I know no more than I have read. But what look to be well-briefed accounts in both The Times and the Financial Times point to such ideas being on the table – along with many others, including reviving the postponed Dilnot recommendations – as the government finally recognises that it does indeed have a problem funding social care.
Such ideas are not new. Andy Burnham’s plan for a national care service, outlined in 2009 and 2010, included a 10 per cent levy on top of inheritance tax to create a ‘free’ social care service alongside the NHS. This plan – floated but never formally adopted – would have covered care, but not accommodation costs.
The Conservatives branded this a ‘death tax’, putting up posters of a gravestone with Labour’s red rose on it and the letters RIP OFF. Now it sounds as though the Conservative government are considering a similar idea.
But given that wealth is so much more unevenly distributed than income, and given that some people are (relatively) asset rich but income poor, plenty of the official and unofficial reviews of social care funding over the years have concluded that one potential solution lies in a claim on the estate of people once they have died. In other words, some form of inheritance tax or wealth tax that helps fund social care, and does so more generously, while reducing the need for some to have to sell their homes to fund their care.
In 2012, Andrew Lansley – despite having been part of the ‘death tax’ attack – put forward an idea that also involved a claim on people’s estates, but Cameron and Osborne would not buy it. Then in 2014 the Barker report – from the independent Commission on the Future of Health and Social Care in England established by The King’s Fund – called for review of wealth and property taxation as a means of raising money. Of course, there are myriad ways that this could be done, but none of them are easy given that inheritance tax is frequently avoided by the better off.
However, if something along these lines is going to happen, it is probably a political truth that only a Conservative government can do it. Why? Because they are the party that traditionally protects inheritance tax. It is a question of trust over motives, which is where the ‘Nixon goes to China’ analogy comes in. For example, although Gordon Brown, as chancellor, killed off its last vestiges, it was Conservative chancellors who wound down mortgage interest tax relief – a middle-class subsidy that was inflating house prices. There was a row when that process began, but nothing on the scale that there would have been if a Labour government had initiated it.
Equally, while it was the Conservatives in the 1990s who launched the earliest welfare-to-work programmes, it was Labour that took them much further, raising the compulsion involved – the public apparently being willing to believe that these measures were there to help people into work, not to penalise them for being out of it, which is what Labour at times accused the Conservatives of doing with their early initiatives.
Which, of course, hints at the political problem. If the Conservatives move in this direction, will it be Labour and the Liberal Democrats who label this a ‘death tax’, yet again killing off ideas for the reform of social care funding, as has happened with every significant initiative, whether it involved a ‘death tax’ or not, over the past quarter century? And it really is a stupid label. After all, income tax, VAT, national insurance, fuel duty, insurance premium tax and many others are all ‘living taxes’. Which is worse?