DEATH TAX

Labour wants to hammer every home owner in Britain with a 10% death tax. The levy would be charged on all estates up to the current inheritance tax threshold of £325,000. Any amount above the existing threshold is already taxed at 40% but the extra charge would add a huge £32,500 on top of the tax bill for such properties. It means people with an estate valued at £500,000 would find their relatives hit with a bill of £102,500 after their death. Health Secretary Andy Burnham raised the spectre of the additional levy at a debate on social care funding. He said, “This is not a flat fee and would enable people to protect 90% of their homes and savings.”

Mr Burnham also claimed that the levy would be “progressive” since the millionaire would pay more than the ordinary pensioner. He said an earlier idea to charge a flat rate on people’s estates once they die, thought to be around £20,000, was still being considered. Shadow Health Secretary Andrew Lansley said, “Everyone knows that Labour wants to impose a death tax on grieving families but yet again Andy Burnham refuses to be straight with the British people about his plans. It is incredible that the Government is set to publish a White Paper outlining their death tax policy within the next three weeks and yet the Health Secretary claims he is still weighing up various options. He is treating people like fools.”

The issue of how to fund care for the elderly has risen to the top of the political agenda in recognition that Britain’s elderly population is steadily rising. By 2026 one in five people will be 65 or over and spending on care services could top £25billion. As many as 45,000 people a year are now forced to sell their homes to pay for nursing home care and a much-anticipated White Paper on the future of social care funding is to be published later this month. But Mr Burnham set out what a “compulsory” model of public funding could look like at the debate hosted by merged charities Age Concern and Help the Aged.

The model, believed to be favoured by ministers, would involve every adult in England paying towards the cost of a new National Care Service, a universal system to provide free services to the elderly at the point of need, much like the NHS. Mr Burnham denied that a single amount would be charged to everyone under a compulsory system. He insisted several options were still being considered, including the 10% levy on the value of a person’s estate, or paying a means-tested amount in instalments over the course of retirement. However, hopes of reaching a cross-party deal are low after weeks of bad blood between the parties and the collapse of consensus talks.

Campaigners estimate that the social care budget needs to increase by £370million a year just to keep pace with the rising costs of caring for an ageing population. Jenny Owen, president of the Association of Directors of Adult Social Services, said, “Whoever wins the Election will be faced with reforming the system and that is why we need common ground.” A Department of Health spokesperson said of the 10% levy, “It’s well known that this is something that is on the table, along with many other options, but, as the Secretary of State made clear, we have not made any decisions yet.” (Source: Daily Express, Mar/10)

Compulsory contributions to elderly care funding, derided by the Conservatives before the election as a “death tax”, will be considered by a new independent commission. The Care Services Minister, Paul Burstow, said all options will be looked at to pay for the rising cost of support for England’s ageing population. He also suggested that pensioners may still have to sell their houses to pay for residential care regardless of the eventual funding settlement, saying that it would be wrong to “fixate” on that problem alone. Mr Burstow, a Lib Dem who has long had an interest in health policy, insisted the Coalition would speed up reforms to the “pretty much wrecked” social care system after delays under Labour, and would bring legislation within two years.

In his first interview since starting his job, he said, “The key things are that we’ve delivered a sustainable funding settlement for social care that makes it clear how much you as an individual will be paying in for your care and how much the state will provide. My ambition is that we have it as part of the second session and therefore have it ready by the autumn of 2011.” Tony Blair had pledged to end the system under which elderly people are forced to sell the family home to pay for nursing care in old age, but Labour ignored the recommendations of a Royal Commission and a Green Paper only emerged last summer after the number of pensioners in the country exceeded children for the first time.

With the black hole in funding for elderly care estimated to reach £6billion by 2020 as life expectancy increases along with dementia rates, Labour’s preferred option was to introduce a comprehensive scheme. This would mean all adults paying into a fund, regardless of whether they needed long-term care, with an option for the money to be taken from their estates following their death. The idea was described by the Tories earlier this year as a “death tax” costing up to £50,000, prompting Labour to back away from making a decision on funding.

The Conservatives wanted a voluntary insurance scheme under which people could make a one-off payment of about £8,000 upon retirement, while the Lib Dems preferred a partnership scheme to which both state and individuals contribute. An independent commission is now being set up to come up with funding options, with members including economists, and must report within a year. Although the Coalition agreement only made reference to the voluntary and partnership models, Mr Burstow said the compulsory option would be looked at.

Speaking at a day centre in his constituency of Sutton, south London, Mr Burstow said, “The phrase was not posed as those being exclusive. We’re not seeing those as the only things that can be considered but in the end it will be ministerial decisions about which of the options they give to us.” Asked about the unpopularity of the “death tax”, he replied, “That’s one of things the commission will have to work through. That will expose and test to what extent whatever the option is will carry public support. Whether you apply that to a compulsory system, a voluntary system or a partnership system, there are trade-offs.”

Mr Burstow said constituents regularly complained to him about the current system, adding, “There’s a whole host of things of which the issue of whether or not you have to use your main asset, your home, to pay for your care is one. But it’s not the only thing and if we fixate and focus solely on that, we’d design a very different system to one that tries to address all those other issues and for a lot of people their aim is to be able to stay in their own home for as long as possible.”

He also confirmed that an interim social care law, providing free home care for those with the most critical needs, will not be implemented despite being rushed through by Labour just before the election. Mr Burstow said neither the Department for Health nor local councils believed the “numbers added up”. He admitted the schedule to hold a commission, draw up a White Paper and introduce a law within a few years was ambitious, but insisted it was necessary as the system will become “not fit for purpose” once the Baby Boomer generation reaches old age. (Source: Daily Telegraph, Jun/10)