Health and Social Care Levy Bill

Lord Desai Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, an advantage of being the last speaker is that everybody has to come back into the Chamber to listen to you, because that is part of the rules of the game.

Let me say first that this has been a good debate. I mean, it is pointless, because we cannot amend a money Bill. The Commons has passed it, and the Government want to rush it through. Whatever we say, no notice is going to be taken, so we can be completely disinterested and make good suggestions—nothing partisan.

This is a bad Bill and a bad proposal. It is bad not so much from the point of view of the people who are going to bear the burden but from the point of view of the Government proposing it, because it is not very elastic in terms of raising revenue. It is procyclical, so the collections will fall any time life is hard and there is unemployment. Then we will have to do what Pitt the Younger set a good tradition for and raise the rates, so 1.25% is not the end of it. It is just the beginning and it will happen steadily if this tax stays on the books—and I am sorry to say that it will.

It is not to finance social care. Let us get it absolutely straight: social care is in the title of the Bill but this is not to finance it. It is to make up the NHS gaps, but they can never be filled. That is very clever, because people have this folk memory that the Beveridge plan created national insurance to finance the National Health Service when it was set up. That is the folk memory I was brought up on. So, everybody will say, “This is quite a nice tax because we will finance our NHS” and even poorer people will say, “I am willing to pay a little bit more to finance the NHS because it is very close to me.” As the noble Lord, Lord Hannan, said, people will be asked, “Will you pay extra tax?” They will say, “Of course I will pay extra tax for the NHS” because, as people have said, we only have one religion in this country and that is the NHS.

Financing social care will have to be done later on and I will come on to that. We have this tax, and lately there has been a flurry of excitement in the newspapers that the Tories are becoming a high-tax party and people are asking what will happen. Do not worry, I say to these Benches; you are not being taxed—the poor are being taxed. That is what the Conservative Party came into power for, so relax, you are all safe. The question of how we will finance social care will remain. How will we organise social care is for another day, but how are we going to fund it?

Before I get into those sorts of things, I have a technical question for the Minister, and I would like a reply. I have been working hard. Will the carried interest of private equity firms be subject to the levy or not? I would like an answer to that because that may bring in a bit more money. The noble Lord, Lord Sikka, shakes his head. I can see that he knows the answer. I do as well, but I will not go into it. He suggested various schemes in which money can be raised. I have always thought that I have a very clever device to raise money. I do not think anybody would like it and I have a record on this; I was sacked twice from the Opposition Front Bench for proposing new taxes nobody liked. Here goes, as I am no longer on the Front Bench.

The original problem is this: the better-off middle classes have property, and they do not want to sell the property to finance old-age care. I think the noble Lord, Lord Hunt, pointed this out. Instead of tackling that problem, the thinking is, “Oh, the poor better-off people want to hang on to their house and pass it on to their children. How can we save them from the terrible problem of having to sell a house?” Fine—let us respect that wish. People do not want to sell their house. The house is the one asset more widely owned in this country—not by the majority but more than any other asset. Quite rightly, people want to hang on to their house. Houses are a very good investment because you have an unrealised capital gain. My question is: how do you tax unrealised capital gains? That is the essence of the problem: making sure that people do not have to sell their house but pay part of its unrealised capital gain. Your Lordships can see where this is going and no one is going to like it, but it is very lucrative for raising money.

I shall take my own example because that is a very simple thing to do; I am not making up the numbers too much but I will not give your Lordships the true numbers. I have a house, which I have had for 17 years, and it has quadrupled in price. No other asset that I know of would give me that high a return, and every middle-class family knows this. However, I have paid the same council tax based on the original price at which I bought the house so I have pocketed all of its unrealised capital gain. The poor council has not got anything out of it, even though it has higher expenditure for collecting my garbage and so on.

How can we release that unrealised capital gain to councils? The answer is very simple. You do not have to raise a council rate; you have only to raise the value of the base on which the tax falls. Since I am a very ambitious person when it comes to imposing tax, I would do this annually but you could do it quinquennially: we could have a national commission for valuing property that valued all properties across the country by different types—one bedroom or two, garden or no garden, SW1 or NE17 or wherever—and it would announce a number for each type of house where the price had gone up by X per cent.

The base of the council tax for those kinds of houses would go up. I would not be taxed fully for the quadrupling of my house price but I might be taxed for its doubling, so I would pay more council tax while I was living in the property. When I came to sell, I would make a capital gain. I would not lose money. My children, or whoever I wanted to pass my property on to, would get the property. The property would not be gone, it would stay with its owner, but we would milk a little bit of the capital gain that accrues every year because of inflation and growth. People think that is impossible but it is not. Anyway, I am not running the country.

I believe that some sort of flexible, elastic tax like that is required. To take care of the problem of the postcode lottery which the noble Lord, Lord Forsyth, mentioned, where a poorer council would not get it but a richer council would, one could equalise because the increase in the base rate would be national. There would be some partial exchange. I cannot solve all problems in this short speech but I can solve some.

I urge the Government to consider this, although not now because they do not have the opportunity. In fact, if not the Government then perhaps, as the noble Lord, Lord Forsyth, said, we in the House of Lords ought to form a committee to solve this problem. Members down the Corridor are not going to solve it because they do not have the time, but we do, and being elderly is our problem so we have a stake in this. We ought to genuinely look for elastic, high-yielding ways of taxing property without, as far as possible, affecting people’s desire to hang on to their property while they live. If we could do that—and only the House of Lords could; no one else can—that would be a very good thing. I urge the Government to make room to implement that proposal and then take our propositions seriously.