There are two ways to view the government. One is that it is one continual cock-up after another. There is a lot of evidence for that, especially at this moment. The other is to think that underneath the veneer of distracting mismanagement there are deeply cynical plans to make the UK a worse place to live for the majority who live here.
The announcement of the cap on social care yesterday falls firmly into the second category. As the Guardian explains:
The cap is a lifetime limit of £86,000 on how much individuals will have to pay towards their care costs. First proposed more than a decade ago by the economist Sir Andrew Dilnot in a government-commissioned review, it is designed to allow individuals hit by hefty care costs to pass on more of their assets to their children, instead of seeing them wiped out.
I will not go into the nitty-gritty detail of this: the Guardian does that better than I can. Instead I want to highlight the flaw in the proposal. This should have been apparent to anyone. It is that as a proportion of the value of a property £86,000 is small in London and massive in the North-East of England.
Leaving aside for a moment any discussion on whether it is even appropriate that the state should be subsidising the inheritances of those fortunate enough to have parents with houses (and that is questionable), if this is assumed to be the goal imposing what is, in all but name, a flat tax makes no sense at all. In the north-east it is possible that £86,000 could absorb most of the value of a property, most especially when the fact that the care cap is not comprehensive and does not cover personal care is taken into account. In London we may be talking 10% or less of the value of a house.
If this is levelling up it is a very strange way to do it. It penalises the very areas where levelling up was meant to be happening and imposes the highest rate of tax on those with the lowest asset base. This move is, then, deeply regressive and in a way that highlights regional inequality in the UK. It is the exact opposite of what the Red Wall MPs were demanding.
Conspiracy or cock-up? I strongly suspect conspiracy released with the hope that cock-up would distract attention. After all, regressive taxation is at the very heart of the Tory agenda, as their moves on national insurance have already shown. In all but name they are now proposing another deeply regressive tax. I hope their own MPs rebel on this one.
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A similar situation exists with inheritance tax.
Whilst a couple in the south-east may own a home worth £350k and consequently be given a £1 million nil-rate band for IHT a couple living in a similar property in the north will find their property is worth less and may have a smaller nil-rate band for IHT.
Your housing status shouldn’t determine the amount of IHT you pay.
Agreed
What have we forgotten?
We’ve forgotten that the bottomless Government money pit that we use to wage war can be used to wage war on want, ill health and infirmity in old age.
All because a certain section of the population want to make money out of it instead.
It stinks.
Agreed
I worry that attacking the detail is missing the underlying story. The Conservatives seem to have no plan at all for fixing the whole question of why NHS patients cannot easily transfer to social care should that be the best for them, or why so many people are scared of the costs which are out of all proportion to most people’s savings. All the Conservatives have done is propose a new tax system which is likely to affect the lowest paid hardest.
What I have found most illuminating about the economics I have learned from this blog is the idea that tax doesn’t “fund” government expenditure, it prevents that extra money in circulation leading to inflation. In other words spend then tax; in contrast what is proposed here is to tax without having come up with any clear plan as to what they will spend.
So there is the additional National Insurance which is actually an income tax (but not applied to rent or investment income) and now this proposal of a “cap” which is actually pretty undefined: it is intended to cover the care element leaving arbitrary how much remains unfunded “hotel costs”. My late mother’s care home fees were on a par with typical daily costs of staying in a hotel, whereas for her of course the comparison was with her modest expenditure living in her own home. Given the move into a care home is usually an end-of-life phase, it is likely that the care element could be defined such that 90% of residents are within the cap but overall face fees hugely in excess of it.
isnt there nuance in this as well as the geography aspect
Isnt this locally administered as well, so not from the governments treasury and inifinite spending power but at the municipal level, i.e. through taxation. So boroughs would have to a have enough in reserve to administer this because if not then what, private care homes?
This local interaction is a key issue….
The sad thing is, it’s likely that people will buy this, like they did with the NI rise (most people were in favour of this, believing that the increase would fund the NHS directly) not realising what is repeatedly stated here that governments can always finance what they prioritise up to full employment without undermining a currency’s value, and, as you, and Jonathan here, have said, tax policy then is separate to spending and has a different purpose – to prevent too much money circulating. Tax then, can be used to create whatever kind of society we want (equal, unequal, etc.) It’s deeply saddening. I hadn’t clocked the regressive aspect of the social care cap (interesting label, sounds almost like the opposite of its actual purpose), but wasn’t surprised when you pointed it out.
Exactly David
Many will swallow it hook line and sinker. Its a travesty, but pretty much what the Tories seem to be doing and good at, e.g. framing a msg which many dont want to read between or go beyond for example, The Red Wall investment is small fry compared to the money not invested prior to this risible “Levelling up” narrative. But the electorate seems to have short memories or just arent bothered enough to want to go that extra yard to think and unpick the real detail behind the slogans
its a shame and means many will only find out at the moment it actually happens to them
[…] I have previously noted, this graphic representation is of a regressive tax where the greatest percentage burden is very […]