Sir Andrew Dilnot in his evidence to the HCLG select committee on funding of adult social care said:
“there is no consensus on where the money should come from. That is what is always politically most toxic for Governments. The debate is much more now about where the money should come from than about what the money should be spent on. My advice for any institution trying to build consensus would be try to focus on that.”
Council tax in its present form and the supplementary social precept creates an inequitable distribution of the tax burden. A Land Value Tax is not assessed on tenants but rather on Landowners i.e. where a large part of the 13 trillion of accumulated wealth in the UK lies.
There appears to be a cross-party consensus around the need for a sharing of adult social care costs between the taxpayer and the individual user as well as a recognition that individuals should be protected from the loss of homes as a consequence of high care needs in later life.
Additionally, as Sir Andrew Dilnot has concluded “a tax is needed to provide lifelong adult social care that is not means-tested.”
A residential Land Value Tax approach may offer a solution to these expressed aims in the funding of adult social care.
The tax base is the rental value of land in owner-occupied and let residential accommodation. The land rental value is assessed by the local authority valuation office.
An owner-occupied homeowners allowance is provided for against a single main residence equivalent to the local housing allowance set by the Local Authority based on the number of bedrooms and area in which the property is located.
The Social care precept is set by the local authority based on its budget for adult social care costs net of any central/NHS funding as a proportion of the residential land rental value taxable base.
The precept is automatically hypothecated for adult social care. Individuals receive care based on assessed needs not on their means.
Tenants and owner-occupiers in low value properties (below 30th percentile locally) receive domiciliary care free of charge. Landlords will pay the social care precept from rents paid by tenants.
Owner-occupiers in higher value properties (with a rental value above the Local Housing Allowance) and owners of let property pay the social care precept in proportion to the value of the property.
Owner-occupiers over 55 years of age or on benefits may apply to defer payment of the precept until the property is sold or bequeathed. Inheritors may apply for settlement of deferred tax liabilities in instalments over ten years as currently applies to Inheritance tax liabilities arising on property.
Owner-occupiers moving into residential care will no longer have the benefit of a owner-occupied homeowners allowance and may choose to rent the prior home privately or to the council as a means of paying the social care precept; or defer payment until the property is sold or bequeathed (where for example the property continues to be occupied by a spouse or dependent).
* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.
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15 Comments
Personal property wealth with regard to the single residential house or flat should be dealt with by inheritance tax otherwise the owner is at the mercy of the whim of council officials in regard to various valuation vectors and allowances, in return for getting rid of council tax. Landlords, on the other hand, should be taxed in a way that lets renters have the financial advantage of no longer paying council tax, which may be the above if the cost of valuing/collecting the tax is very low. Empty houses, on the other hand, should pay both council tax and the above tax. This could all be bound up in a way that appeals to the electorate.
on Landowners i.e. where a large part of the 13 trillion of accumulated wealth in the UK lies.
I’m not saying you shouldn’t have a LVT but you need to give this a bit of thought. Where is the £13 trillion? If 1% of a large area of land is sold for £1 million does it follow that the total value of the land is £100 million. Possibly, yes, but probably not if it all appears on the market at once. And, almost certainly not if there is an N% LVT applied.
If the gross yield on land is M% and we have an applied tax of N% then the net yield becomes (M-N)%. So how does this affect the total valuation of the land? I’m not sure tbh but it’s not going to increase it ! That’s for sure.
The idea of an LDV funding the NHS, or social care, or whatever, wouldn’t be out of place of the left fringes of British politics. It’s essentially a make-the-rich-pay argument. Sadly the rich don’t have enough money! Even if you squeezed enough out of them to do what you wanted for one year you’d still have the problem of how to ‘fund’ it the year afterwards.
So, yes, by all means have a a LDV if you want a more equal society but don’t think it’s going to ‘fund’ anything for any significant length of time. That can only be done by making sure our economy is working to its full potential with everyone who is capable of making a contribution being encouraged to make it. So we have to get rid of unemployment, underemployment, and low wage insecure employment to be able to do that.
LDV should be LVT in a couple of places in my previous post. Getting my mental wires crossed there!
When Lloyd George went for this for a second time after WW1 it was yet another factor in splitting and dividing what was then left of the Liberal Party.
The funding of Adult Social Care should not be dealt with separately from the issue of provision.
If you look closely at the current set up the recipients and front line workforce are getting a pretty poor deal out of system designed to turn a profit for the care companies.
Local authorities give contracts to a range of providers most if not all fail to provide a reasonable level of service.
The elderly person in need of care have a choice but it is effectively Hobsons Choice.
Picking which provider is the least worst.
Having experienced all this at first hand in my ten years as a carer I have come to the conclusion that the best way forward is a publicly funded national care service.
The fundamental flaw in Andrew Dilnot’s pitch is his assumption that this will be funded out of local taxation, when we know that one of the big problems is central government’s unwillingness to distribute centrally collected tax revenues to local authorities; preferring instead to spend the monies on its various vanity projects…
The issue of where money is to be found for any service is not the same issue as what the money should be spent on. As far as adult social care is concerned I have to declare an interest as I am an old person. I note, by the way that adult social care and the needs of old people seem to be equated.
The debate that we need to be having is that of how we organise our society so that people are able to look after themselves as long as possible.
In particular I have in mind major changes in life, one of which is retirement. I am surprised at the reduction in walking as an incidental to other activities now. My smartphone kindly tells me how many paces I take. Changes of this nature need to be managed, and ready access to best advice would be a help.
So really the answer is to ask the people concerned what they need and have enable ideas to be shared. After that the money involved can be estimated,
In the last 20 years there have been several green and white papers, commissions and independent inquiries considering the future of adult social care. While consensus has generally been achieved around the nature of problem and developing a vision for the future, consensus on the key question of how, as a society, we should pay for adult social care and support has eluded governments to date.
Party politics has been a key obstacle. Cross-party initiatives such as those initiated by Norman Lamb with Conservative and Labour MPs offer the prospect of sustainable long-term funding solutions. Quite often it is only when former politicians are free of political constraints that they can freely talk about what needs to be done. This is the case with David Willetts who served under Vince Cable in the coalition government. Now at the Resolution Foundation he has been engaged with research at the Inter-generational commission https://www.resolutionfoundation.org/media/blog/we-face-a-choice-of-funding-the-nhs-through-capital-taxes-or-cutting-our-childrens-pay-packets/
The conclusions are stark. “We face a choice of funding the NHS through capital taxes or cutting our children’s pay packets.”
The issues are now about who pays more and how much they pay.
“The Conservative Party now faces the challenge of fighting elections without offering tax cuts – the manifesto of 2017 is a taste of things to come. The Labour Party faces the challenge of whether it is credible to say only the rich will pay more – taxing bankers cannot pay for everything. We are the first generation to have lived our entire lives under the modern welfare state.
We have benefitted from Britain’s house price boom which has made home ownership unaffordable for our children. We have done so well compared with the younger generation in so many ways that we cannot just turn to them to pay for our health and social care.
And it is this cost above all – paying for a service we particularly benefit from in our old age -which is pushing public spending inexorably upwards. We are going to have to make a contribution too. And when we look at how we should do this there is one obvious source – the wealth we are sitting on.”
“Today, for every ten working age adults there are seven young and old people needing their support. This dependency ratio has hit a historic low and now it is rising inexorably upwards. By 2030, that ratio will rise to nearly nine.
So we are entering a period when just to maintain the existing welfare state promise is going to cost more and more. By the end of the next decade this cost will rise by £20bn a year. By 2040 it will rise to £60bn.”
That translates to an income tax hike of 15p in the basic rate by 2040, the burden of which will overwhelmingly fall on the generations following baby boomers.
Is that kind of tax rise really the legacy we – a generation that owns half the nation’s wealth £13tn of wealth – want to bequeath to our children and grandchildren?”
While I can see the value of this proposal for use of Land Value Taxation to fund social care, Joe, I am wondering whether there is a danger of recreating the Bedroom Tax in doing so. Take the case of someone over 55 who owns and enjoys living in a fairly large house, with perhaps four bedrooms. S/he will pay some extra social care tax, I suppose, because of the size of the house – especially I suppose if it is detached. Perhaps s/he will have a spouse, or a live-in carer, which will justify the use of at least two bedrooms.
But what if the spouse dies, and the person does not need a carer, but chooses to live on in the largeish house alone because s/he is happy there and has room for family or friends to come and visit. Would the social care precept have to be increased as soon as s/he found themselves living alone? And then decreased if a carer joined the household? I think that sort of close control of people’s living conditions would seem something of an infringement of liberty, and of privacy, and be rightly unpopular.
Katharine,
in the circumstances you outline the individual concerned will be paying council tax at present and paying a social care precept on top. Under the current government proposals the value of homes will be included as an asset for the purpose of assessing domiciliary care, so they will pay the full cost of care received at home as well.
Under the LVT proposal for a hypothcated social care precept the care is delivered free of charge at the point of use. To protect against the loss of homes the cost of providing adult social care is shared across all residential landowners, avoiding the situation where approx 10% of the population face care costs in excess of £100,000 and forcing the sale of homes.
The individual concerned, in a large high value family home, would at no point face the loss of the home. The homeowners tax free allowance would be available to the remaining spouse/dependent as long as the property remains owner-occupied and is based on the size of the property. In this case it would be based on the local housing allowance for a four bedroom propery. The tax is assessed on the land rental value to the extent that value exceeds the homeowners allowance.
Over 55’s and homeowners on benefits may choose to defer payments until the property is sold or bequeathed and inheritors may avail themselves of a 10 year instalment payment of any accrued taxes on bequaeathed property.
The key point is that the fear of facing catastrophic care costs in the last years of life is removed for all. A sustainable and affordable source of segregated funding is set aside for local authorites to meet their statutory duty to provie care for the elderly without the need for means tests. As a hypothecated local tax it is also removed from the political vagaries of central government funding and subject to democratic oversight via the elecion of local councils officials i.e. responsibility and accountabiity are brought together. Liberalism in action.
Thanks, Joe, yes I see the value of this proposal, in taking away the fear of catastrophic care costs for individuals by means of sharing the costs across all landowners. I knew that it was also highly beneficial in taking away the fear of losing the home from the owner. It seems that there will be no problem, so long as no development of the idea occurs to start assessing whether the homeowner should be financially penalised for having several bedrooms. Of course it is our correct policy to end the so-called bedroom tax on rental property, but the attitude that brought that tax in in the first place, that started regarding the space that individuals have in their homes as a matter to be pried into and regulated, should be contested in all cases.
Sounds like Amber Rudd is backtracking on the two child limit on universal credit. It shows that pressure can pay.
David Raw,
Yes, I agree that pressure can pay and needs to be kept up. Amber Rudd seems to want to do something about the serious problems encountered with the rollout of Universal credit and has also advised that Tenants will in future be able to arrange for housing benefit to be paid directly to Landlords.
More needs to be done, however. The benefit freeze needs to be lifted sooner rather than later and the 5-week delay in the first payment addressed. Rather than loan advances, it would be sensible to make a non-refundable payment of 1 weeks benefit after 1 week, 2 weeks benefit after three weeks and only then go to monthly benefits after five weeks to ease the transition to monthly payments. In some cases (for individuals that cannot cope with monthly budgeting), payments will have to continue to be made on a weekly or fortnightly basis rather than monthly.
It seems like a match made for convenience rather than in heaven. There are plenty of other demands for this money. The concept however of taxing land is sound and is in fact our policy.
I must correct Joe when he says it is the local authority that assesses land rental value. It is the national Valuation Office that maintains land value records, independent of councils. This ensures consistency and is a protection against corruption. In USA the property tax systems are entirely run by councils, with the City Assessor often a political appointment. This leads to corruption. We must not do that here.