Taxing assets ‘fairer’ way to pay for social care reform

A “fairer” approach to tackling the social care crisis would be for people to contribute up to 15% of their assets towards care costs, according to a former prime minister’s think tank.

Reports suggest Boris Johnson is preparing to increase National Insurance by 1.25% to raise up to £11 billion per year, while capping personal lifetime contributions at £80,000.

But the Tony Blair Institute said it would be “deeply unfair” to raise National Insurance, and “impose the costs of care on the shoulders of the young”. A fixed monetary cap, would “disproportionately hit less wealthy households”, according to Mr Blair’s think tank.

Instead, ministers should use a more “proportionate” alternative of tying care contributions to asset wealth.

In its report, Fair Social Care: Priorities and Funding Options, the institute said: “We propose a more progressive alternative cap set at a fixed percentage of an individual’s initial assets. With this approach, the state would step in once a care user had contributed 15% of their assets towards the cost of care.”

The institute said there was a major problem with the Government’s rumoured proposals to put National Insurance up.

“It would leave the cost of improvements in social care falling almost entirely on those of working age and tax labour income rather than those who have benefited from the boom in asset prices of recent years,” it said in the report, due to be published today. It would also exacerbate existing differences between the tax treatment of the employed and the self-employed.”

The 37-page report proposes three further “progressive” funding alternatives to shift “more of the burden on older generations”, including an increase in income tax for the over-40s, replacing council tax with a tax proportional to property values and reforms to capital gains tax.

James Browne, head of work, income and inequality analysis at the Tony Blair Institute, said: “The Government should aim to protect families against ruinous care costs as part of their social care reforms.

“Capping their total care costs is critical but it should be done in a fairer way than a flat cash maximum that will mean people with modest assets, such as homeowners in parts of the country with lower house prices, being forced to use a higher proportion of their assets than their better-off peers to pay for care.