It isn’t easy for a Conservative government to organise a system of caring for others. The key problem for them is that almost all of the fair and reasonable methods of funding a care system are ideologically unacceptable to them.
Conservatives don’t tend to be keen on taxation, or on public services, or on socialising risk. Yet those are necessary if the government is going to help people who are facing huge and unpredictable care bills through no fault of their own.
Election promises and U-turns
That difficulty hasn’t stopped Conservative prime ministers from making confident announcements. Theresa May was the champion at this. She managed to boldly announce a new care policy at the start of an election campaign and then almost immediately proceed to dump it. Not surprisingly, she got punished by the electors for her dither and confusion on the issue.
Boris Johnson learned from her difficulty. During his general election campaign, he stuck to making over-confident promises and didn’t bother with pesky things such as actual policies. He assured the public with all his usual sincerity that he knew how to fix the care crisis without raising taxes or national insurance costs. He just didn’t say when or how he would do so.
Therein lies the core of the problem. Care is expensive and Britain has an ageing population. The country needs more care workers and it needs them to be better trained and better paid. The government has added hugely to that problem by driving out thousands of high-quality, thoroughly experienced EU staff.
Up and down the country, local authorities are running massive deficits on their care budgets. The service needs a serious injection of cash. But Conservative Party members’ objection to taxation means that this huge extra bill has to be paid without raising income tax.
Inheritance tax is one solution
One of the obvious solutions to this is inheritance tax. Many of the people who need care have significant assets tied up in houses that have massively increased in value in their lifetime. Yet inheritance tax has been deliberately lowered, to the point where a couple who own their own home can leave a million pounds completely tax-free to their relatives.
Whether relatives get to enjoy that kind of inheritance bounty is a pure matter of luck. In one family, the elderly relatives will be healthy until shortly before their deaths and require very little in the way of care. In another, both parents will experience decades of suffering at the hands of a debilitating condition like dementia that requires round-the-clock care from a specialist.
Evening out the risk by raising inheritance tax and using the money to help those facing huge bills would be the fairest option. But it is one that would be completely unacceptable to the current government, for narrowly ideological reasons. Few Conservative MPs entered parliament so they could vote for taxing inherited wealth.
Paying for the social care system with a National Insurance
Nor is it going to be easy to get Conservative backbenchers to queue up to vote for the proposed increase in National Insurance charges. They have good cause to be reluctant on this. National Insurance has to be paid by those in work. Taxing the young to pay for the old, at a time when many of the elderly own houses that most of the young will never be able to afford, isn’t remotely fair.
National insurance also has to be paid by employers. The last thing most employers expect to face as they try to rebuild their businesses after a pandemic is for the government to hit them with a tax bill to pay for care. There is also the simple fact that those on low wages pay have to pay out a much higher proportion of their income in National Insurance than those with large earnings.
National insurance is a directly regressive tax. Using it to pay for care means taxing the incomes of the working poor to help the retired rich to avoid eating into their capital. It is neither a vote winner, nor a morally justifiable proposition.
The holes in a government subsidised insurance system
So Conservative backbenchers have recently been wriggling around trying to find a way out of their ideological problems. Some of their ideas are either staggeringly naïve or deliberately disingenuous. Marcus Fysh, the Conservative MP for Yeovil, has been touring the media arguing that the way to solve the problem is to introduce some kind of government-subsidised insurance system.
Effectively he is arguing for a clumsy system like the costly Obamacare. No private insurance company can offer an affordable policy to meet the needs of a fit 80-year-old woman with dementia. The subsidies would have to be enormous. And the problems of meeting the needs of those who haven’t taken out insurance would remain.
People who need care exist right now and need funding now. Not at some time in the future when a mythical private insurance scheme comes into play. So, the money has to be found now and hard choices have to be made about where that money will come from.
You cannot individualise the cost of care, because frequently those costs go way beyond what any individual, or their friends and family, is capable of funding. That means the collective has to step in and help to even out the risks and share the costs.
The government has choices. It can fund care via a progressive taxation like income tax or inheritance tax, or visit the costs on the poor via regressive taxation, or it could put much more of the costs on those who need care and have capital assets like a home.
It has chosen to hit the pockets of the working poor in order to protect the capital of wealthy retired people. If you’ve worked all your life to build up assets of £86,000 you risk losing everything if you need care. If you inherited millions and need care, you now know that you will never have to contribute more than £86,000 and can pass on the first million entirely free of tax.
Johnson’s empty promise of social care investment
Johnson found it easy to issue glib promises that he could solve the care problem without raising any major tax. He has not found it easy to deliver. He has turned himself into the exact opposite of Robin Hood. He is taking from the poor to give to the rich. It remains to be seen whether the working poor will forgive and forget.
