The coronavirus crisis has left the future looking bleak for many young people. Not only has their education been interrupted and pivotal teenage years ruined by restrictions, but their economic future is being undermined by a vicious, gerontocratic conspiracy.
If sky-high rents and the near impossibility of ever getting on the housing ladder weren’t bad enough, younger people now face a national insurance rise to help pay for the care of a generation who are sitting on trillions of pounds of accumulated property wealth.
Despite this, there remains a pervasive reluctance to make older people pay for their own social care. After Theresa May’s ‘dementia tax’ debacle in 2017, no politician has dared suggest that, actually, you might need to sell the family home, rather than leave it to poorer taxpayers to foot the bill for your social care. Let’s say this clearly: something has to change.
The particular issue of selling property is often painted as a moral dilemma, rather than an economic problem. We hear emotive arguments about the sentimental value that property may hold, and people’s desire to leave something to their children, without the obvious corollary to the argument – that someone else, in this case working age taxpayers, will end up paying instead. To make matters worse, encouraging older homeowners to stay in properties that are often far too big for their needs only exacerbates the shortage of suitable housing for younger people.
That’s why raising NI has been called a ‘reverse Robin Hood’ tax. The beneficiaries of hikes to NICs would be the already wealthy and their relatives, especially as you don’t have to pay NI on income from investments or rental properties.
Meanwhile a 1% rise would see the average earner’s tax bill go up by £204 and those earning over £50,000 a year will pay an extra £404 a year. Worst of all, unlike income tax, those on the very lowest wages still have to pay NI. That particularly rankles coming from a party that has spent so long talking about ‘taking the lowest paid out of tax’ by increasing the personal allowance.
Of course, no one doubts the need to get more money into the sector. A report by the Health Foundation estimates the social care funding gap will reach £14.4 billion by 2030/31, and the Covid crisis has exposed how rickety and under-resourced the sector is.
But it’s not just about funding. As set out in a previous Adam Smith Institute paper, social care is already cursed with being run by inefficient government bodies. With staff shortages, an ageing population and an inundated NHS, this is a sector facing myriad problems that a tax hike alone won’t get near solving. As the ASI’s Eamonn Butler puts it, throwing money at the sector without fixing its underlying problems is ‘like pouring oil into a rusty engine – it still gets you nowhere’.
That said, if you are going to raise money for the sector, there are some obvious places to look before raising taxes on working age people. We could start by means-testing some of the universal benefits given to pensioners, such as free bus passes and the Winter Fuel Allowance. If the Government is determined to fund it through NICs, at least change the system so that working pensioners pay it as well.
Nor should the Government shy away from encouraging greater private sector involvement in social care, both through insurance and government cost-sharing, or pension fund financing of care home provision.
The real injustice of social care isn’t that older people have to sell property to pay the bills, but that some older people have to spend through the nose, while others can sit on their assets and leave plenty to their kids. Dealing with the lottery element, perhaps through an insurance-style system (as set out in this Centre for Policy Studies report), should be integral to a revamped care sector.
This might seem a simple political calculation for the Tories. Protect older voters, who tend to vote Conservative, while shafting younger ones, who tend to vote for leftwing parties. Those with an eye to the future might wonder, however, whether our current political settlement will put an entire generation off ever voting Tory.
Ultimately this boils down to who, and what, the Government should be prioritising. This might seem a simple political calculation for the Tories. Protect older voters, who tend to vote Conservative, while shafting younger ones, who tend to vote for leftwing parties.
Thar rationale, and the continued dismissal of young people’s concerns and needs, is all the more intolerable given the miserable time they have had for most of the last 18 months. It’s also a short-termist approach, and Conservatives inclined to look further into the future than the next election cycle might also consider what these kind of policies are doing to the party’s image.
Not only is balancing who pays for social care vital now, it is also imperative for ensuring a strong economic future. By incentivising pensioners not to sell up, while burdening with tax the very people they should be offering opportunity, our politicians risk undermining the economic vitality we will badly need to fund social care in years to come.
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