Social Care Funding (EAC Report)

Lord Truscott Excerpts

Thursday 28th January 2021 Grand Committee

[Lord Truscott (Ind Lab) [V]]

My Lords, I too congratulate the noble Lord, Lord Forsyth of Drumlean, and the Economic Affairs Committee on their incisive report. Social care funding has become a postcode lottery, as he said at the outset of this debate, and a national disgrace. Her Majesty’s Government should increase funding by at least £10 billion to restore the 2009-11 levels of quality and access. I agree that social care should be largely funded by general taxation. It should not be funded by local authorities, which, as we have heard, results in variegated levels of care across the country. However, given the challenges facing social care provision, we should be even more ambitious. The old age dependency ratio is increasing, while the number of working-age adults needing care is multiplying. Those receiving social care should not rely on future generations to cover their care costs. Deferred payment agreements should be a right so that no one receiving care is ever forced to sell their home while in care.

Social care should be paid for through taxation. Let me be specific. Those receiving care should pay for it through an inheritance tax, formerly and more properly called death duties, paid on their passing from their estate only if they have the means. The existing £500,000 inheritance threshold could be maintained. A majority of beneficiaries would not be affected; they would receive that inheritance only after the tax was paid. For example, the Tax Research UK blog has estimated that if inheritance tax was raised to 80%, double the current rate and similar to that paid after the Second World War, it could raise £174 billion—virtually enough to pay for the entire pandemic, let alone social care.

We have to recognise that we are facing a wartime-like crisis exacerbated by the pandemic, which requires a wartime-like response. Currently, a lucky half of young people will inherit 90% of the nation’s wealth; the rest will struggle. Of that wealth, 90% is presently owned by just half of elderly households. The desire to leave everything to one’s family and siblings is not as strong as it once was. Equity release is increasingly popular. People want to enjoy their lives now but be secure in their own homes in old age for as long as possible. Domiciliary care is the preferred option for many, and it should be provided by the state.

Instead of taxing the general population and businesses into the ground or looking at a wealth or property tax, we should tax people for their social care only after they have passed. This avoids squeezing the asset-rich and cash-poor while they are alive. It would be a death duty, not an inheritance tax. There would still be plenty to inherit. Inheritance has doubled in the last 20 years and is expected to do so again in the next 20. If the issue of funding social care and other essential public services is not addressed, and the lucky half benefits by inheriting the bulk of the country’s wealth, intergenerational inequality will worsen—something the noble Lord, Lord Lansley, mentioned. Instead of levelling up, the Government will find that they have created even more inequality and regional disparities, and our society and public services will be the poorer for it.