Lib Dems slam Government as National Insurance rises and triple lock suspended

Lib Dem MPs have slammed the Government for breaking two election promises in as many hours.

Today Boris Johnson and Rishi Sunak announced that they were going to pay for social care in about the most regressive way possible, by placing the burden on National Insurance. That takes in more lower paid people. The £130 it will cost for someone on £20,000 a year doesn’t sound much, but, believe me, the poorest households will feel every single penny. There were fairer ways of doing this, but you can’t expect that from a Conservative Government.

Emma Kennedy had it right on Twitter:

Ed Davey said of the plans for social care:

These broken manifesto promises are betrayals that will haunt Boris Johnson’s premiership. Whether it’s young working families, carers or small business owners, those catastrophically failed by the Conservatives during the pandemic are now being asked to pick up the tab.

The Liberal Democrats will oppose these unjust plans in Parliament tomorrow and urge all Conservative MPs to do the same. For the past two elections we have been clear about how to fix the social care crisis in a fair and progressive way. The Government must do the sensible thing and sit down with other parties to find a consensus, instead of drawing up divisive policies on the back of a fag packet.

And then we have the Lib Dem triple lock being suspended for a year. The brainchild of our Pensions Minister Steve Webb during the coalitiion years, after miserly 75p rises during Labour’s time in office, it guarantees pensioners a rise in the State Pension equivalent to the greater of average earnings, 2.5% or inflation.

Now, there will be some who will say that a rise of 8% would have been too much and unfair on the young who are bearing the brunt of the pandemic. This is where I would like to see us embrace the power of and to help both. Too many pensioners are living in poverty – 1 in 5 and most of them are women. They will feel the impact of this and not in a good way. Maybe the Government should raise pension credit by 8% to give hem some targetted support.

Treasury spokesperson Christine Jardine said:

Another day, another broken Tory promise. With two million pensioners living in poverty, the triple lock was their guarantee that they wouldn’t have to face the old days of 75p rises.

Now it’s gone. Even if this Government says it’s a temporary move, how can pensioners have any faith that this is the one promise they will keep?

Liberal Democrats demand that the Government doesn’t leave pensioners living in poverty high and dry. The triple lock offers them vital protection – we cannot abandon them.

However, the architect of the policy, (now Sir) Steve Webb is pretty untroubled by its suspension. From the Evening Standard:

Former Liberal Democrat pensions minister Sir Steve Webb who is now a partner at LCP (Lane Clark & Peacock), said: “The UK state pension remains relatively low by international standards and many women in particular depend on the state pension for a large part of their income in retirement.”

But he added: “To relax the rules on a one-off basis because of the distortions caused by the pandemic but to reinstate the policy for future years strikes the right balance.”

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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97 Comments

  • There are plenty of good grounds for opposing the Government’s proposed policy menu for ‘fixing’ social care, but that’s not enough.

    Liberal Democrats need to come out with a positive alternative bearing in mind that 93% of care provision for the elderly in England has now been privatised….. and that the profits of these private care companies (many of them hedge funds and based in offshore tax havens) amounted to £ 1.5 billion last year.

    There needs to be a social Liberal/local government funded alternative with decently paid progressive career structures. And of course, it wouldn’t hurt to point out the impact Brexit has had on the current care work force……… or have we found it convenient to forget the issue of Europe now ?

  • I have to wash my hands – I find myself cheering the Government on, on both of these. The pensions triple lock has long had its day and is becoming a status symbol of generational inequality. Although Caron’s idea of topping pension credit up has real merit.

    On social care, there WAS a manifesto commitment to increase taxes to pay for extra NHS funds at the last two elections. Anyone remember whose? Yes we’d rather have seen income tax go up to spread the load more fairly, but given the need to square Tory MPs this is a decent outcome and a future Government can make it fairer now the rise is established. And the principle is back to the Dilnot package that we brought in during coalition, but the Tories ditched when they could ignore us. So I wish Ed Davey had welcomed the Government picking up Lib Dem manifesto proposals, and urging him to keep reading for more ideas.

    So, am I mopping into Victor Meldrew supporting the Govt today? I hope not, but both proposals deserve more nuance than the simple ‘evil Tories’ within our comfort zones.

  • I completely agree with @tpfkar. The triple lock may have been useful as a temporary measure, but was never going to be sustainable in the long term, since in the long run it will push an endlessly-increasing proportion of GDP into pensions. And more money for the NHS is great news. The fact that it’s coming from NI (and dividend tax, which Labour and LibDem MPs seem to be conveniently ignoring) is a minor quibble next to the the principle that more money has been secured for the NHS. I’d really much rather be seeing a more nuanced response from the LibDems (and from Labour).

  • John Marriott 7th Sep '21 - 9:29pm

    I have to say that I also agree with the first two posts regarding the triple lock. Talk about offering a hostage to fortune. An 8%+ rise in the state pension is clearly not justified. Even Steve Webb tonight has more or less said that its ‘suspension’ for one year could be justified. I’m glad this was quoted. However, it will be interesting to see if it is reinstated next year. I have my doubts.

    As far as adult social care is concerned most of the emphasis has been on residential care for the elderly. Let’s not forget the not so old with special needs either. As to how we finance what we want to achieve for me the answer has go to be a mandatory social care tax or a hike in the Basic Rate of Income Tax. Joe Bourke elsewhere reckons that this won’t be enough. He may be right in the long term; but, in the short term, raising around £10 billion may help to concentrate minds on finding a bipartisan solution.

    Clearly this kind of money should not be handed over without a few strings attached. One of the issues I would like to see addressed in pay levels for care workers. Also a ceiling should be put on the fees that care homes are allowed to charge their residents. As for an alternative such as an insurance scheme, no private organisation, when asked, has been willing to touch it with a barge pole. I wonder why?

  • The hike in the dividend tax is sensible and the NI hike is to be converted to new Health and Social Care levy from April 2023. Unlike NI, those who continue to work past retirement age (and earn over £10k) will also pay the levy.
    The triple lock has been important in dragging pensioners out of poverty and needs to be preserved.

  • For once I have to say that I agree with the Government proposals.
    Admittedly, I would have rather seen the increase in Tax, rather than NI, but then, desperate times and all that am willing to take this compromise. The NHS needs desperate funding if we are going to get through the back log of NHS waiting lists and we have been putting off social care reforms for decades.
    I am sure we can iron out any points of contention later on, but for now, I am just happy to see that we are making a start on funding health and social care.

    As for suspending the Triple lock, I also think it is the right thing to do under the present circumstances. Too many of the public forget that the welfare budget over 50% of this goes to pensioner related benefits, and yet, whenever the yearly figures comes out for the total welfare spend, we are instantly inundated with media headlines from journalists and politicians about the unemployed and disabled “alarm clock Britain” remember those days. So until Pensioner related benefits and Out of work and disability benefits are separated and given their own departments in order for complete transparency to the country on where money is being spent and justifying that spend, then sorry, I can not support an increase to Pensioner related benefits which will result in unemployed and disabled people being vilified for it when the welfare budget increases.

  • I agree with David and Johns post.

    Something also has to be done about the colossal fees that are being charged by these care homes for the elderly and adult social care, with profits being syphoned off to tax heavens for hedge funds.
    I think the arguments that free markets and private providers can provide cheaper services compared to the public sector when it comes to health and social care have long gone and thats before even getting on to the scandals that have happened in far to many of these organisations like “Winterbourne”
    I personally would like to see some proper research done and tell us what Adult and Social Care is costing us now to the Private Sector and what it would cost to bring it in house to the public sector. I think its time we saw a proper cost / benefit analysis to having these services privatised out

  • In reality, the 1% on NI is not all that different from the penny on the pound although NI is a bit more regressive and the threshold to start paying is lower.

    The penny on the pound policy would cost someone on £20k approx £80 per year rather than £130.

    The fact is that if we want well funded social care we need to pay for it. The most effective way of raising revenue is a small basic rate increase. Many of the supposedly fairer alternatives that target the better off might not actually raise enough revenue.

  • Colin Paine 7th Sep '21 - 11:12pm

    Another example of Labour lite from us. What about constructively engaging with the government’s approach to amend and improve it rather than knee jerk “evil Tories” populism?

  • Nonconformistradical 8th Sep '21 - 7:08am

    On the triple-lock – I’m concerned to see support for its freezing when that hurts poorest pensioners most – it was instituted for a purpose and state pensions in UK are still poor compared with most other developed countries.

    Likewise the ‘blunt instrument’ approach of increasing NI hurts disproportionately low earners and struggling small businesses.

    Perhaps a different approach might have been to lower the higher rate and additional rate tax band thresholds so the better off contributed more than the less well-off…? Maybe as part of a package?

    And I share the concerns of David Raw and Matt about fees in private care homes with the profits being siphoned off to hedge funds etc.

  • Peter Martin 8th Sep '21 - 7:17am

    Say we reduce the incomes of the poorest by increasing their taxes £120. They’ll have less to spend. This means that the government won’t get the £20 VAT on the shoes and clothing that would otherwise have been purchased.

    The remaining £100 wont be available to pay the income tax and corporation tax of the workers and businesses who would have sold the shoes and clothing. So that’s say another £30 that the Government won’t get. The remaining £70 that would have been spent by the workers and businesses …….

    We can keep going like this until the Government doesn’t get any extra revenue at all from the extra taxation imposed. Which they won’t.

  • The problem the government is addressing is comfortably off middle aged voters seeing the house they thought they were going to inherit disappearing into a care home black hole. The phrase “you can’t take it with” no longer applies; elderly and infirm parents are doing just that. These are often homes bought for £25k decades ago and now worth £0.5m or more, a juicy prospect dangled, and then arbitrarily snatched away by dementia.
    This is less about ‘care’, and more about the wealth gap, and the way rocketing house prices are widening the gap, and perpetuating it across generations. Many of the disappointed middle-class would have passed on the proceeds of their parents’ demise to their children, who face higher house prices relative to income than previous generations. This neatly closes the loop which excludes the poor and the children of the poor.
    Increasing NI is clearly not the answer, and ideally there should be increased wealth taxes, principally inheritance tax. No political party would dare to suggest such a thing.

  • John Marriott 8th Sep '21 - 7:55am

    @Andy Daer
    Here we go again. It’s the “soak the rich” mantra, folks, a knee jerk reaction from the political left, unworthy of someone, who is prepared to put the Lib Dem logo on his posts. Yes, there ARE some very well off people out there and quite a few, who are asset rich and cash poor. However, as I always say, if you want serves you have to pay for them. That’s why I shall continue to advocate a hike in the Basic Level of Income Tax or even something like the Social Care Levy that slipped out during Johnson’s Commons speech yesterday.

  • Nonconformistradical 8th Sep '21 - 8:11am

    @ Peter Martin re 8th Sep ’21 – 7:17am
    For once this non-economist gets what you’re saying – it’s clearly and briefly explained – thank you.

  • Peter Martin 8th Sep '21 - 8:27am

    @ John,

    Thanks for the positive response to my previous comment.

    I always associate the Lib Dems with the younger element of our society. It is quite reasonable for younger people to express opposition to the desire of the elderly to maintain their privileges. Housing is obviously one of them.

    I’d like a society which was much more equal than it is. But then that because I’m a socialist. But even as a Lib Dem you should be in favour of equality of opportunity which, if I understand Andy correctly, is what he’s saying we don’t have in the housing market. Opportunities are very much defined by social class and inheritance opportunities.

  • Steve Trevethan 8th Sep '21 - 8:28am

    Might there be more to this matter than money?
    Might the tax rise to pay for care etc. be a tacit but behavioural acceptance/admission that the role of the state is vital and that the state has been reduced too much?
    Ditto the belief/theory that “the Market” aka. money is the supreme guide of governmental/social policies is inefficient?
    Is this a move to tax the poorest most?
    PS Could we please have some definition/detail of the meaning of “Left” when used politically?
    http://www.taxresearch.org.uk/Blog/

  • Peter Davies 8th Sep '21 - 8:40am

    I think we are failing to criticise the fundamental purpose of this legislation which is to protect the ability of the rich to pass on their wealth to their heirs. Poor people do not have £86,000 and will be expected to use up all their savings. Rich people will get their care costs cap and pass on their millions to heirs who may already be rich.

    I would suggest two possible progressive versions:

    Care contributions should be based on wealth with those under £100,000 paying nothing and those over £1,000,000 paying 100%. It would be paid for by introducing an inheritence tax at levels that actually raised revenue.

    Care free on NHS paid for as above plus converting NI contributions to income tax.

    I’d get rid of the UK dividend income discount anyway.

  • Keith Orrell 8th Sep '21 - 8:59am

    Andy Daer has the right solution. 25 years I suggested to the party that raising money for social care should come from a levy on every estate (above say £50k) so that no person would have to sell their home. Having to sell your home is not just about the money – if you have to go into care you are generally not in a position to deal with all the stresses involved in selling a property. This way all estates would pay something but no estates would lose everything. But Andy is right we won’t have the courage to propose a “death tax” – that was the response I got 25 years ago.

    Triple lock – do you trust this Government not to find another excuse in future years ?

    Keith orrell
    York

  • Peter Davies 8th Sep '21 - 9:11am

    25 years ago we most certainly were proposing an inheritance tax (paid by the heirs rather than the estate) at much higher levels. I think it’s still policy though I don’t recall any leader since Charles Kennedy mention it.

  • Andy Daer has got it right about the large unearned gains made by those who got on the housing ladder in decades past. By using the Bank of England’s inflation calculator and assuming that the hypothetical £25k house was bought about 40 years ago, it can be seen that had its exchange value only risen in line with inflation, it would now be in the order of £125k, a fivefold increase. If the exchange value has actually increased twenty times the additional rise of £375k in exchange value would be attributable to the site value. We have a policy, Land Value Tax which if applied at a sufficiently high rate would be more than enough to cover the cost of retaining the pensions triple lock and to fund the proposed increases social care funding. LVT has the benefit of being justifiable ethically unlike inheritance tax.

  • Peter Davies 8th Sep '21 - 9:31am

    LVT goes without saying.

    Inheritance tax is on money accruing to the recipient. I cannot see how tax on money accruing from work or even investment can be justified but not completely unearned receipts from inheritance.

  • Jayne mansfield 8th Sep '21 - 9:38am

    @ Colin Paine,

    In what way does one constructively engage with the Tories? For example, the
    £86,000 cap appears only to cover actual care, not food and accommodation, so called hotel charges. Will the changes really mean that some people will not have to sell their houses? Will the extra money raised actually find its way into improved social care or into the pockets of the Tories cronies and those who finance the party? Evidence from the money Johnson has spaffed’ into the pockets of the latter during the pandemic, does not make me terribly confident that one is dealing with trustworthy people.

    Johnson is brilliant at big crowd pleasing promises. The devil is in the detail. We need to know more.

  • Peter Martin 8th Sep '21 - 9:49am

    Just to put some numbers on the changes:

    At present someone with cash and other assets of £1,000,000 and who is faced with a care bill of £300,000 would have to drop to £700,000. But if the changes pass, their outlay will be £86,000 max so they will only drop to £914,000 – a saving of £214,000.

    And this needs to be ‘paid for’ by imposing an extra tax on all our jobs?

  • Barry Lofty 8th Sep '21 - 10:09am

    Although pleased that social care and pensions have taken a much needed rise in importance in the national debate and some steps have been taken to improve things, however the proof of the pudding will be in the eating, personally I would not trust the present incumbent of No10 any further than I could throw him, then again I dislike him intensely ?

  • Nonconformistradical 8th Sep '21 - 10:15am

    I second Barry Lofty 8th Sep ’21 – 10:09am

  • Andrew Toye 8th Sep '21 - 11:08am

    There needs to be urgent reform of NI and Income Tax so tapers are fairer to lower paid workers, otherwise the very people on the front line actually delivering the care are being asked to pay for it from their wages. We need to put warning signs near red and blue walls in case of collapse.

  • Do away with NI and use increases in tax bands to raise the money..Unearned income should be subject to increased tax and ‘overseas/avoidance schemes should be better policed..
    As for pension ‘reforms’.. There are relatively ‘well off’ pensioners and, by all means tax pensioners on income/assets, but according to the OECD The UK state pension (at under 30%) is among lowest, as a percentage of the average wage, in the developed world (The average across the OECD is 62.9 per cent)..To even get the £155pw you must have paid full NI contributions for at least 35 years..
    The fact that there are more working age citizens in poverty than pensioners is NOT an argument for ‘tackling’ state pension increases but an argument for increasing the basic wage and benefits; to argue otherwise is to join the Tories in the ‘race to the bottom’..

  • George Thomas 8th Sep '21 - 11:46am

    How bad do things have to get in Westminster until Lib Dems reconsider the stance on independence? Could it never get bad enough or are we on our way there considering the most likely outcome of next election is either Boris continuing to act this way or Tory membership deciding who will get to act this way next?

  • Russell Simpson 8th Sep '21 - 12:29pm

    Surely the tax rise is 2.2%. An employer paying an employee £100 has to pay £1.25 extra and the employee gets £1.25 less. 2.5/115.05=2.2. Polls show that the public supports a 1p rise but not a 2 p rise. Well that is what they’ve got. Why is the media not saying this? Or have I missed something?

  • Russell Simpson 8th Sep '21 - 12:53pm

    I’d have preferred 2p on income tax but broadly speaking both tax rise and triple lock break is sensible. Opposing breaking triple lock for this obviously statistical anomaly shows that libdems don’t really want to go back into government

  • Peter Davies 8th Sep '21 - 12:53pm

    As far as I can tell this is not NI which would be payable also by employers but “a new, UK-wide, 1.25 per cent Health and Social Care Levy on earned income”. What I fear though is that it will not be excluded from the measure of income used in assessing Universal Credit (as NI is). so those paying Income Tax and NI while receiving UC will lose over a quarter of their take home earnings.

  • Peter Davies 8th Sep '21 - 12:56pm

    Sorry, that should be lose over 4% of their take home income and receive less than a quarter of their gross earnings.

  • Russell Simpson 8th Sep '21 - 1:07pm

    @peter davies. It’s 1.25 by employer AND 1.25 by employee so 2.2

  • Peter Davies 8th Sep '21 - 1:35pm

    My quote above is from the government statement. I should have known not to believe that. According to the BBC it will be only on employees from 2023 but until then will be part of NI (hence collected from both).

  • neil James sandison 8th Sep '21 - 1:45pm

    I have a preference on taxing unearned income from inheritance , wealth taxes on capital gains and windfall taxes on companies who did very well indeed out of the pandemic to create a sovereign fund to be redistributed to social care providers at local government level . taxing jobs and income through NI is regressive .

  • John Marriott 8th Sep '21 - 1:58pm

    Now they need to get the Johnson plan through the House of Commons. Could it fail? If so, what then?

  • The serious questions now are: how much of this will Sunak go along with? If the NHS does just grow bigger on the back of the cash injection and social care does not improve ?

    Will the NHS just gobble it all up for itself and it disappears without trace – or will there be a resurrection of the cash strapped local authorities to take social care provision back in-house under local democratic control – or will extra profits be shipped off overseas to tax havens by the ennobled billionaire owners ?

  • Laurence Cox 8th Sep '21 - 2:31pm

    I’m glad to see someone (Caron) with a profile in the Party finally saying: ‘Too many pensioners are living in poverty – 1 in 5 and most of them are women. ‘

    I made this point repeatedly in the Party consultations on UBI and nothing has come of it. We passed a ‘Citizen’s Pension’ as Party policy back in 2004 thanks to people like Steve Webb, but it seems that TPTB in the Party don’t want to acknowledge it.

    But even worse affected by the NI increase are graduates; a graduate earning over £27,295 p.a. will be paying a marginal tax rate of 42.25% at an income around the median, while at over £50,270 p.a. they will be paying a marginal tax rate of 52.25%, more than any Premier League footballer earning millions per year. Most student debt will never be paid off.

    https://www.newstatesman.com/politics/economy/2021/09/how-tax-system-squeezes-graduates

    As there is increasing evidence that the graduate premium is getting smaller, we are in danger of hammering graduates twice; with higher taxes now and lower pensions in future.

  • Homeownership in the UK stands at 63% i.e. by far the majority of voters that will elect governments to represent their interests and that of their families. It is the main asset that the great majority of people in the UK invest their life savings into. It was a point well understood by Thatcher when she introduced right to buy for council tenants and is the basis of Rawls property owning democracy.
    Welfare-state capitalism is based upon a redistribution of income through means tested social welfare, as opposed to a reallocation of productive resources under property-owning democracies. This form of social structure produces socioeconomic classes, at the base of which sits a demoralised grouping who are dependent upon state-sanctioned welfare. Although welfare systems demonstrate some concern for equality of opportunity, it fails to substantially deliver upon the ideals of equal cooperation because it permits the concentration of wealth and productive resources within an elite minority.
    For a great many families today, equity in the the family home provides the basis for their children to acquire a deposit or guarantor,
    The Liberal solution is a residential Land Value Tax https://www.libdemvoice.org/a-residential-land-value-tax-approach-to-funding-adult-social-care-59639.html. This operates in much the same way as a gift tax. It is either paid annually by those that have sufficient cash income or deferred until death when the accumulated tax debt is paid from the estate in much the same way as an inheritance tax would be collected. It is payable by property owners not tenants.
    The tax yield in the UK is 36% of national income with roughly half been allocated to the provision of public services and half being redistribution/transfers. Norway, Iceland, Sweden etc have much higher levels of homeownership than the UK. To deliver Scandinavian levels of public service provision will require increasing the tax share of national income as the UK economy returns to operating at close to capacity (but not until then). Tax yields in Sweden and Denmark are closer to 45% although Norway through judicious investment of its North Sea oil resources has maintained tax levies below 40% https://econlife.com/2020/02/scandinavian-taxes/

  • Russell Simpson 8th Sep '21 - 3:58pm

    @ Joe Burke
    With LVT, would stamp duty be scrapped?

  • Russell Simpson 8th Sep '21 - 4:00pm

    @ Lawrence Cox
    Graduates also earn approx £10k more than non graduates. What I don’t see is why interest should be more than RPI

  • Peter Davies 8th Sep '21 - 4:31pm

    @Lawrence Cox
    You forgot to mention that if that graduate on over £50,270 p.a. has three children, they will also have an additional 25% rate for withdrawal of child benefit.

  • Russell,

    yes, Stamp duty would be scapped with LVT. This is included within the fairer share proposals for a Proportionate council tax https://fairershare.org.uk/

  • Peter Martin,

    “Say we reduce the incomes of the poorest by increasing their taxes £120. They’ll have less to spend. This means that the government won’t get the £20 VAT on the shoes and clothing that would otherwise have been purchased.”

    This is the crowding out argument that government spending crowds out private spending. This argument doesn’t hold.

    All spending including government spending is part of national income. When the government spends in the NHS or care sector it is paying the wages of staff and the invoices of suppliers. That income is taxable just as spending on shoes is taxable. If the government spending is on UK workers and suppliers it might even help with the balance of payments in diverting some spending from Shoes shipped out from China to wages for UK workers and suppliers. Under present conditions the government is likely to be reducing part of the large increase in private savings that have accumulated during the furlough/pandemic period.

    Taxes serve to reallocate real resources from the private sector to the public sector and redistribute income from the working age population with higher earnings and those with substantial unearned income to retirees and other dependents.
    There are . however, different deadweight costs associated with different kinds of taxation. LVT has the lowest (possibly zero) deadweight costs.

  • Peter Martin 8th Sep '21 - 5:23pm

    Joe,

    I don’t know about you, but when my tax coding has risen I’ve had more tax taken from my wages and salary, and I’ve had less to spend as a result. That’s all there is to it. It’s nothing to do with crowding out. It’s the same with NICs. They are a tax in all but name. Taxes are designed to reduce our spending power. Period.

    You are saying in the second part of your argument that the spending on ” paying the wages of staff and the invoices of suppliers” will also generate revenue for the government. This is true. So why raise taxes if the new spending generates its own new revenue?

    It’s because there could be inflationary pressures if they didn’t. “Could be” doesn’t mean “will be”. So as I have written previously the question should be about the resources available in the economy rather than about the money the Govt may or may not have in its kitty.

  • Nonconformistradical 8th Sep '21 - 5:35pm

    @Joe Bourke
    “This is the crowding out argument that government spending crowds out private spending. This argument doesn’t hold.”
    I can see that the government has, by fleecing the poor person of £120, now got £120 more which it could spend – on something.

    That something might not benefit directly the poor person now unable to buy that pair of shoes – or put food on the table or whatever essential purchase they really need to make but can’t.

    Perhaps for example it might be spent by the government on further subsidies to the house purchase market (more house price inflation?) – of no use to the poor person who has no hope whatsoever of ever buying a home.

    It bothers me that you seem unable to discuss these problems in the context of individual poverty-stricken human beings. Does economics always have to be divorced from morality?

  • Peter Martin,

    the tax yield in the UK is 36%. That is the amount the government collects in various taxes from private sector spending. It recovers the same average amount in taxes from its own spending. The rest is net spending on private consumption (including the sums spent by those in receipt of public pensions and other transfer payments). All that taxes do is change the mix between household spending and government spending
    Tax yields increase as the economy grows or as the proportionate share of taxes extracted national income is increased. What grows the economy (or more precisely per capita GDP) is investment in human and physical resources both public and private.
    LOUIS XIV’S FINANCE minister, Jean-Baptiste Colbert, declared that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” A modern finance minister might rephrase this as “the largest possible amount of revenue with the smallest possible amount of economic and political damage.” LVT has the lowest deadweight cost of all taxes.

  • Nonconformist radical,

    the poor people these measures are aimed at is those in need of social care and unable to meet the fees charged by local authorities and funding required to address NHS backlogs to the tune of £12 billion a year combined, although mostly for the NHS.
    National Insurance contributions (NICs) will increase by 1.25% for one year only for employees, employers and the self-employed from April 2022. Those above State Pension Age are not impacted by the April 2022 changes.
    From April 2023, a new ringfenced Health and Social Care Levy of 1.25% will be introduced which will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs and will also be extended to those over State Pension age who are in work. When the new levy comes into effect, National Insurance rates will revert back to current levels.
    The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568. The government will also increase by 1.25% from April 2022 the rate of income tax which is paid by people who receive dividend income from shares.

  • Nonconformistradical 8th Sep '21 - 7:57pm

    @Joe Bourke
    “The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568.”

    So those comfortably off OAPs i.e. those with both state and reasonable employment-related pension income but not still working won’t have to pay any extra. Doesn’t seem just – and I write as someone falling into that category. It would have been better to modify tax rates and/or tax bands to ensure better off people contributed.

  • Nonconformist Radical,

    if comfortably off OAPs have dividend income from investments over £2k they will also have to pay an extra 1.25% tax as well.
    It would have been better to assess an LVT on all residential property owners (including the multiple property owners Emma Kennedy refers to in the tweet quoted in the article). It is a progressive tax based on property values and is assessed on those families who stand to gain from a cap on care costs.
    A Land Tax was Lloyd George’s original proposal to fund basic unemployment and sickness benefits, but he could not get it through the Lords and it was amended to a National Insurance contribution paid by employers and employees with a part coming from general taxation. Workers, employers and the Treasury contributed to an unemployment fund. The National Insurance (NI) system extended its reach to add funding for state pensions, and enhanced unemployment benefits.
    Much was made of the contributory system by Beveridge which was based on the principle of insurance contributions during working years to provide financial security during periods of unemployment, sickness and in retirement.
    Many people seem to think that National Insurance funds the NHS which it never has. Ultimately, NI is just another tax and could be simplified by being added to income tax rates and assessed on all incomes at a single rate i.e. 32% for basic rate taxpayers, 52% for higher rate taxpayers and 57% for additional rate taxpayers or slightly below the combined rates.

  • Nonconformistradical 8th Sep '21 - 10:55pm

    @Joe Bourke
    “if comfortably off OAPs have dividend income from investments over £2k they will also have to pay an extra 1.25% tax as well.”

    Which planet are you living on?

    As it happens I do have some shares but not a lot and certainly nowhere near enough to produce dividend income over £2K. Believe it or not one can be a comfortably off OAP without shareholdings coming into it. And hence not paying any extra towards the NHS and/or social care under these new arrangements.

    Why are you avoiding the issue? I ask because while I have no problem with LVT we don’t have it now – and it is right now when we have a big problem over NHS and social care funding.

    So please focus on what can be done now, not in the long term future, to raise more funds on a fair basis.

  • Nonconformist radical,

    people pay tax in many ways depending on their circumstances. They pay tax on their income, consumption and investment/savings income i.e. income tax, national insurance, VAT, council tax, excise taxes on alcohol, tobacco and fuel, stamp duty, insurance premiun tax, air passenger duty, inheritance tax, capital gains etc. Those that earn more pay a greater proportion of their income in tax. The top 1% of earners pay a third of income tax while over 40% of adults pay no income tax at all https://www.theguardian.com/business/2019/nov/13/richest-britain-income-tax-revenues-institute-fiscal-studies
    As Mark Twain quipped – There is a solution to every problem: simple, quick, and wrong.
    The UK tax system is complex and inefficient. What can be done to reform the system was laid out in the Mirrlees Review of the UK tax system in 2011 https://ifs.org.uk/publications/mirrleesreview
    The £12 billion of funding announced by the government yesterday will go some way to relieving pressures on the NHS and limit the the very high costs incurred by some at the end of life, as Dilnott recommended. The amount allocated for social care, however, will do little to relieve the ongoing funding pressures in that sector.
    As you get older you may well need your pension income to pay for costs up to £86,000 plus so called hotel costs if you have to go into a care or nursing home.
    If you cannot meet the costs, they can be paid with a deferred payment arrangement, so it is paid from your estate, from the sale of your home or by the beneficiaries of your estate.
    Land Value Tax works in a similar way. It is either paid from rental income, current income of occupiers or paid when a property is sold/bequeathed. The difference is that costs are spread more widely and in proportion to property wealth, so no individual suffers excessive costs if the suffer from dementia or similar debilitating illnesses in their later years.

  • @Joe Bourke: I read the article you linked to describing your proposed Land Value Tax. Correct me if I’m mistaken, but it looks to me very much like the Council tax – just without the banding system, and with a few bells and whistles attached.

    Trying to think through the effect that LVT would have: The suggestion that tenants wouldn’t pay it is not realistic: Landlords would just add the tax to the rent they charge. LVT – if I’ve understood it correctly – would necessitate a massive bureaucracy to work out the rentable value of each property each year, as well as deal with owners disputing valuations. It would serve as a disincentive to people to improve their homes (because if the improvement increases the rentable value, then they’d pay more tax once they’d improved them). It would force people who are income-poor but have high-valued homes to sell their homes in order to be able to afford to pay their tax. And if market conditions cause property values to rise or fall, people would find the tax they pay changing unpredictably beyond their control. I can’t see how that can all add up to a better solution than simply using income tax – which is directly related to people’s ability to pay.

  • Peter Martin 9th Sep '21 - 6:57am

    @ Joe,

    I’m not quite sure what point you were trying to make in your last comment. If it was that the purpose of taxation was to create some fiscal space to allow the government to spend without creating extra inflation then we might be in some agreement.

    It’s not to raise money which can then be spent. As previously explained, if govt raises NIC taxes it reduces what we have to spend. If our spending is reduced the multiplier effect ensures that back of envelope calculations on the increased tax take are invalid . This is not the Laffer effect. If the government then creates new spending on something else then it is the new spending which creates its own new revenue.

  • Peter Martin 9th Sep '21 - 7:19am

    Whenever the subject of tax crops up Joe can always be relied on to make a pitch for a Land Value Tax. It’s going back to the Economics of the 19th century and Henry George’s Single Tax. The theory is problematic because there is a presumption that national governments need tax revenue to fund their spending rather than to regulate the economy.

    This is not to say it’s necessarily a bad tax but there is no way it would ever be a single tax. It would be just another tax.

    http://bilbo.economicoutlook.net/blog/?p=30215

  • John Marriott 9th Sep '21 - 9:17am

    @Joe Bourke
    Instead of having to keep repeating your arguments in favour of LVT, why not just give those, who wish to cross swords with you, the links, as you did with me recently and save a bit of space on LDV?

    Oh, by the way, further to my last post on this thread at 1.58pm yesterday – before tge LVT avalanche hit the ether – I see that Johnson’s proposals got through last night, so I guess it’s all a bit academic (too ‘academic’, some of us might say). I assume that, like Labour and SNP, the Lib Dem MPs didn’t give them their support. Let battle commence!

  • Nonconformistradical 9th Sep '21 - 9:30am

    “@Joe Bourke
    Instead of having to keep repeating your arguments in favour of LVT…”

    It would be much more helpful if Joe came up with a proposal to address the immediate problems of the NHS and social care – a proposal which includes all UK taxpayers contributing instead of letting off some better-off taxpayers. A proposal which could be implemented quickly, not in years’ time.

  • Barry Lofty 9th Sep '21 - 9:55am

    Forgive my ignorance but it seems measures voted for last night to relieve the pressure on social services are unlikely to have any affect for at least two years? plenty of time then for another crisis to eat up any good intentions, cynical I know but one gets sceptical as the years roll by.

  • The current Covid crisis has seen the ‘world beating’ failed Test and Trace system allocated almost £40 billion for 2 years of failure ( The Department of Health & Social Care (DHSC) justified the scale of investment, in part, on the basis that an effective test and trace system would help avoid a second national lockdown – but since its creation we have had two more lockdowns.)
    Decades of crises in Social Care are being allocated just 1.8bn a year for social care over the next three years (thee Health Foundation suggests at least £6bn extra a year is needed to keep social care from further deteriorating in England.alone)…

    If the money could be found, and largely wasted, on T&T and other ‘fads’ there can be no excuse for ignoring the disabled and the elderly..

    A socirty should be judged on how it looks after the needs of those least able to look after themselves…I watched, on Ch4 news, the Labour ‘shadow’ waffling when asked for details of their alternatives; this party is no differentrb ‘Fine words butter no parsnips’ ..

    It has been said many times that ‘Scandinavian Health/Social care cannot be got with US type taxation’..The whole issue of funding needs our whole tax system to be subjected to a ‘root and branch’ overhaul NOW..

  • Barry Lofty 9th Sep '21 - 11:13am

    Ann [email protected] “a society should be judged on how it looks after the needs of those least able to look after themselves” quite so, sadly our country falls well short of that at the moment and agree on the money wasted by the the incompetence of this government.

  • Peter Martin 9th Sep '21 - 11:43am

    @ Ann Bailey,

    “The whole issue of funding needs our whole tax system to be subjected to a ‘root and branch’ overhaul NOW..”

    This is just wishful thinking. It’s not going to happen.

    The killer question will inevitably be “How are you going to pay for it?” If you don’t have any better answer than put a penny on income tax for this, another penny for that and another few pennies for the other, with some NIC and VAT rises thrown in for good measure, you won’t get enough electoral support.

    Prof Stephanie Kelton might be able to help you out:

    https://themariannewilliamsonpodcast.com/2020/12/18/episode-9-stephanie-kelton/

    She’s not saying we can afford everything we might like but she does explain how to get the most from what is potentially available.

  • Nonconformistradical 9th Sep '21 - 12:03pm

    @Peter Martin
    “@ Ann Bailey,

    “The whole issue of funding needs our whole tax system to be subjected to a ‘root and branch’ overhaul NOW..”

    This is just wishful thinking. It’s not going to happen.

    The killer question will inevitably be “How are you going to pay for it?””

    I do wonder how much money could be saved by HMRC if the tax system did have such a root and branch overhaul – because it seems a total mess. But I get the point – it isn’t going to happen. Easier to kick it onto the long grass.

    Could any progress be made on simplifying the tax system by doing it in stages – i.e. taking a particular area known to be especially complex and costly to administer and/or where collection of tax isn’t good, analysing it properly to understand what actually NEEDS to happen as opposed to what actually does happen?

    And having done that perhaps separating that which NEEDS to happen into straightforward and complex areas with a view to implementing the simple parts as far as possible through IT, leaving more HMRC staff to focus on the more complex issues which require more manual intervention? And junking totally the processes which don’t need to happen?

  • There is an unwholesome symmetry in three news items that were issued this year ? A case of taking from the poor to fill the pockets of Tory supporting rich and big business. Nice work if you can get it- for the chumocracy :

    1. “Unimaginable” cost of Test & Trace failed to deliver central https://committees.parliament.uk › committee › news 10 Mar 2021 — In May last year NHS Test and Trace (NHST&T) was set up with a budget of £22 billion. Since then it has been allocated £15 billion more: …

    2. Serco profits soar by a third amid increased demand for Test … https://news.sky 5 Aug 2021 — Outsourcing giant Serco has seen its profits soar – bolstered by its controversial involvement in COVID-19 Test and Trace contracts..

    3. GOV.UK 8 September, 2021. Record £36 billion investment to reform NHS and Social Care. What a coincidence – the same amount as sent to Serco and puts Johnson’s ‘ground breaking’ H & SC proposals into perspective.

  • A 1% increase in income tax is estimated to raise around £4 billion. To raise the £12 billion cited would require an estimated 3% increase in the income tax rate. The example cited of a worker on £20k having £130 NI deducted from his pay would using income tax have £223 deducted from his pay in addition to the freeze on personal allowances announced in this years budget. A yougov poll indicates a split down the middle on the NI increase poll
    Andy Burnham advocates a extra 10% tax on estates at death or wealth taxes
    Vince Cable supports a proportional council tax as advocated by https://fairershare.org.uk/. He says “An additional or alternative measure could be to make property taxation (currently in the form of council tax) more equitable by establishing the tax rate as at least proportional to the property’s modern value. Several Conservatives have endorsed this approach. Taxing asset wealth rather than incomes would also capture some of the large unearned gains accruing from recent asset inflation.”
    In the spring budget, the IFS told us that the Chancellors plans would require £30 billion of spending cuts or an equivalent amount of future tax increases to maintain proposed spending. This current measure is £12 billion of the tax increases. There is more to come as the economy recovers and it is almost certainly going to include some form of asset taxation as income tax or NI increases reach their economic and political limits. With the corporation tax increases announced earlier this year, we are told this will push Britain’s tax burden to the highest level since 1950 Tax burden
    The LVT proposals for social care are straightforward and can be implemented quickly. The tax base is property value less a regional homeowner allowance equivalent to the capitalised value of the local housing allowance which is based on the lower 30th percentile. So only higher value properties in the top 70% are assessed. A 0.5% annual levy on this value would raise sufficient funds to provide care services free at the point of use to all those who need them.

  • Peter Martin 9th Sep '21 - 4:38pm

    @ Joe Bourke,

    “A 1% increase in income tax is estimated to raise around £4 billion.”

    It won’t for the same reason as an increase in NIC won’t raise any extra revenue as explained earlier. An increase in the taxes of the lower paid especially will result in their spending less which will mean, through the multiplier effect, that the tax take will largely be unchanged.

    “Andy Burnham advocates a extra 10% tax on estates at death or wealth taxes”

    If he object of the excercise is to “raise” a few billion pounds these are much better options. The Government will be taxing assets that are often inert. So, for example, if the Government taxes away some of my savings which I’ve no real intention of spending they will be raising extra revenue. As I had no intention of spending them anyway the negative effect of the multipier doesn’t apply because there isn’t anything to multiply.

  • Nonconformistradical 9th Sep '21 - 4:49pm

    @Joe Bourke
    “A 1% increase in income tax is estimated to raise around £4 billion. To raise the £12 billion cited would require an estimated 3% increase in the income tax rate.”

    That’s basic rate presumably so would affect to some extent all taxpayers with income liable to at least basic rate. Is there a good site which provides current estimates of tax raised when either rates and/or boundaries between rates are changed please? Preferably an independent view…

    And also, how about the impact of increasing the highest rate of NI – the one which is 2% across the board on earnings over £4,189 a month (a figure way above the median full-time salary I think). i.e. shifting the burden to the higher-paid.

  • Peter Martin,

    the increase in tax rates raises the proportion of national income (GDP) that is allocated to public service provision/redistribution versus households private consumption. Taxes and public spending increase, private consumption or more commonly the level of private savings declines. That is what taxes do, reallocate spending on human resources, goods and services to the public sector from the private sector.
    Some countries collect a high proportion of national income as in the Nordic model and deliver a high level of public services. Other countries have a low tax regime and correspondingly low levels of public service provision/social security. You can operate a growing economy in either model. The difference between the two lies in the level of social inequality and level of provision of universal public services and welfare.

  • The government (ONS) provides estimates of what tax changes might yield https://www.lovemoney.com/news/71311/uk-government-tax-income-national-insurance-increase-pension
    There is already no limit on employers national insurance. Employees with earnings over the maximum threshold pay 2% NI on higher earnings so their combined tax and NI rate is 42% compared to 32% at basic rate. For the highest earners over £150k it is 47% combined. The share of income tax paid by the top 1% of taxpayers has risen from 24% of the total collected in 2007-08 on the eve of the financial crisis to 30% currently.

  • Peter Martin 9th Sep '21 - 7:44pm

    @Joe,

    “the increase in tax rates raises the proportion of national income (GDP) that is allocated to public service provision/redistribution versus households private consumption”

    I don’t follow what you are getting at. For example, recent Govt support via the furlough scheme wasn’t dependent on money raised in taxes but the consumption in many households relied entirely on Govt spending and other benefits paid.

    “Taxes and public spending increase, private consumption or more commonly the level of private savings declines.”

    Is this a crowding out argument? Whatever it is, again, I don’t follow what you’re getting at.

  • Must admit I’m in the John Marriott camp on this, think Bourke v Martin has had more sequels than Rocky…

  • Peter Martin,

    if the government increase the income tax rate by 1%, it will increase the net amount it collects in taxes by circa £4 to £4.5 billion. This is the gross amount represented by the increase of around £6.5 billion less the tax foregone on reduced private sector spending of approx 1/3rd of the gross amount.
    The pandemic has brought about a shutdown of many businesses and a large drop in private sector consumption i.e. both supply and demand in the economy have contracted together. During recessions people reduce their spending, businesses slow investment and both firms and households try to pay down debt or increase savings by deferring consumption. The U.K. economy contracted by 9.9% in 2020 while there was a large build-up of household savings
    In such circumstances government is able to fill, in part, that lost output by spending into the economy the accumulating savings of households and firms no longer being consumed or invested in real assets.
    As the economy comes out of lockdown, idle resources are brought back into use. Household savings begin to be reduced and spent, firms start to borrow for investment. The government no longer has domestic surpluses to borrow against and so must allow economic growth to reduce its deficits. If it wants to increase its own spending at a higher rate than the rate of growth of the economy it must either increase the proportion of tax taken from national income, cut back its spending in some areas while increasing by more in others or accept a higher rate of inflation and the rise in interest rates that comes with it.

  • Peter Martin 9th Sep '21 - 10:21pm

    @ Joe,

    “if the government increase the income tax rate by 1%, it will increase the net amount it collects in taxes by circa £4 to £4.5 billion.”

    This is only true if it assumes that it will raise this amount in advance and increases its spending by this same amount before it receives any extra revenue. In which case it is the extra spending of £4 billion, or whatever, that creates the extra revenue of £4 billion.

    Govt creates net £ assets in the non Government sector when it spends and destroys them when it imposes taxes. So all govt spending must come back as taxation revenue, sooner or later, for any positive rate of taxation. Where else can it go? The difference between spending and revenue is what is saved in the economy in any one time period.

    Increasing the rate of taxation will result in the same revenue being recouped in fewer transactions but it doesn’t change the fundamentals. The difference between what is spent by govt and what is received in taxation is what is saved by everyone else. The govt can only increase its revenue, for any given level of spending, if fewer pounds are being saved. Which is possible if extra taxes are aimed at the wealthy who will be more inclined to save, but not if aimed at the poor who save far less.

  • Peter,

    I think the thread is straying too far from the subject. The state is raising £12 billion next year for the NHS and social care. It is going to finance that spending by raising National Insurance (employee and employer) and income tax on dividends while suspending the triple lock for a year.
    What we can say is that this measure will not fix the social care crisis and there are more tax rises to come in this parliament.
    Ironically, we have a high tax and spend Conservative government in power. That changes the dynamics of opposition for both Labour and the Liberal Democrats.

  • Peter Martin 10th Sep '21 - 5:45am

    The traditional objection to “tax and spend” , which is actually should be the other way around, ie “spend and tax” was always because it was seen as a way of income and wealth redistribution from the affluent to the less affluent .

    This time it’s the other way around. It’s a way of preserving the wealth of the relatively wealthy elderly. So, it’s not at all ironic and entirely in keeping with Tory values. Many would say it’s a straightforward case of robbing the poor to pay the rich.

  • John Marriott 10th Sep '21 - 9:30am

    @Joe Bourke
    “I think the thread is straying too far from the subject”. Has he got it at last? Thank you, ‘Marco’, for your support. I thought that when it came to complaining about certain contributors hogging the threads (and not incurring a ‘flood protection’ warning), I was a bit of a one man band!

  • Russell Simpson 10th Sep '21 - 10:23am

    @Joe Burke and others.
    1% rise in income tax basic rate. IMO there’s two reasons why Chancellors go to NIC rather than Income tax. One is the name. People still think there is some vague connection with NHS/benefits (there isn’t). The other, is that because both employee’s NIC and employer’s NIC have been increased by 1.25% the real increase is 2.2% (ie 2.5/115.05). I’ve asked my friends and mostly they were ignorant about employer’s NIC and didn’t see how it affected them. I do payroll, I know how it works. There is no difference between employer’s and employee’s NIC. It’s deducted and paid to hmrc at the same time. If an employer pays £100, come April 2021 they’ll need to pay £1.25 more for employee to get £1.25 less. Taking advantage of the ignorant, gullible public may be cynical, bordering on dishonest but if I was in Govt I’d do the same (Liz Kendal suggested using NIC in 2018). What surprises me is that nobody in the media seems bothered in educating the innumerate public.

  • Russell Simpson 10th Sep '21 - 10:28am

    sorry, “come April 2022” obv

  • Very good points, Russell.

  • John Marriott 10th Sep '21 - 4:27pm

    At the risk of an accusation of hypocrisy, may I respectfully suggest, at the risk of extending this thread even more that of equal importance as how you raise the extra cash is the question of HOW this money is to be spent? In the case of the NHS, how many more consultants will be trousering extra fees and how many more diversity managers will be appointed. Will they, according to LBC this morning, still be paying £15+ for a £1.99 pair of rubber gloves for their cleaners, thus making even more money for the spivs now masquerading under the title of ‘entrepreneurs’? As for the care sector, will private providers be upping their prices ASAP and how much of the extra funds will be going to pay their employees a decent wage? Finally, how many new doctors and nurses will be trained, who then, as soon as they qualify, seek to ply their trade abroad?

    Whatever extra cash becomes available by whatever means needs to have conditions attached to it.

  • John Marriott is correct. In my experience in local government Social Care, those who run the NHS will be very reluctant to let any of the new funding trickle down to Social Care.

  • David Raw.

    most of the £12 billion per year is allocated for the NHS with about £1.8 billion per year going to local councils to help with social care costs https://www.newstatesman.com/politics/2021/09/why-social-care-crisis-not-over

  • It’s a bit more complicated than that, Mr Bourke.

  • Peter Martin 11th Sep '21 - 9:23am

    I think I understand that Lib Dems are against NIC increases and triple lock suspensions but what are they in favour of to solve the crisis of social care?

    More pennies on the pound on the standard rate of income tax? An increase in VAT to 25%? All of these measures are passing the problem to the younger generation who already have enough tax to pay on their often modest incomes. Then there are often student loans to repay which is just another income tax in all but name. So that’s three taxes on income. Income Tax + NI + Student Loans.

    I didn’t see too much wrong with Labour’s Plan but that was dismissed as a ‘Death Tax’. As if it is somehow OK to tax life more than death! Even Theresa May’s ‘Dementia Tax’ wasn’t quite so bad as this.

    It’s hopelessly inadequate anyway even looking at the economics conventionally. The usual suspects have complained that they can’t understand anything that might be described as unconventional, that they aren’t capable of lateral thinking and the ‘penny on the standard rate of income tax’ mentality is the only one that works for them.

    If so, then you’re stuffed as the Aussies might say! You might win the odd by-election if you play it safe and campaign on pot-holes in roads, but you won’t win many votes in General Elections.

  • Nonconformistradical 11th Sep '21 - 9:43am

    @Peter Martin
    “what are they in favour of to solve the crisis of social care?”
    How about changes which involve better off people paying more for starters ?Beginning by adjusting the tax bands and/or higher tax rates?

    And doing more to close tax loopholes and prosecute serious evaders and on conviction confiscating their assets?

    And looking at why care costs are so high in the first place?

    Not suggesting that any of these measures alone will solve the problem. But I think they could all be involved.

  • @Nonconformistradical – I’m pretty sure the Government is already doing what it reasonably can to close loopholes etc. Loopholes and tax evasion are the kind of thing that opposition parties like to cite as if it was an easy fix to bring in limitless extra revenue – in reality, it’s a constant game of cat and mouse as people work out new ways to exploit loopholes and HMRC then has to respond.

    As far as making the better off pay more… The ‘better off’ already see high income tax rates. To my mind, social care should be a safety net for all of us, and it’s therefore only fair that we all contribute to it. I’m dubious about the ethics of ‘other people can pay for all our goodies‘ kinds of reasoning, which is what arguments for making the wealthy pay amount to.

    I do agree with looking at why care costs are so high in case there’s something that can be done there, but I rather suspect that the answer will be, because it’s a very capital-intensive (new buildings etc.) and labour-intensive (carers) industry and that’s what it really does cost. Maybe there’s some scope for innovation using better technology?

    In the long run I think we need to look at why so many more people need care now compared to just a few decades ago – and I’m pretty sure that’s going to be largely the result of unhealthy western lifestyles and so many people not bothering to look after their health throughout their adult lives. If I’m right, that is very fixable, but needs the Government to push ideas of personal responsibility much more: That’s something the LibDems seem to me quite weak on.

    I suspect social isolation is also a contributor to demand for social care: Again, I’d imagine that’s solvable in principle (and would carry a lot of good quality-of-life benefits for people too) but requires commitment by the Government to finding ways to bring people together in their communities more.

  • Nonconformistradical 11th Sep '21 - 11:04am

    To add to my last post…

    https://www.theguardian.com/politics/2021/sep/10/if-national-insurance-must-fund-social-care-at-least-make-it-fair

    “Ministers could fix the system to make higher earners pay the 12% standard rate, handing the Treasury £20bn of extra revenue, according to a team from the London School of Economics and Warwick University.”

  • Simon [email protected] ” I am pretty sure the government is already doing what it reasonably can to close loopholes etc” I am not so reassured given the number of government ministers and Tory party donors who use tax loopholes etc to escape paying UK taxes.

  • Peter Martin 9th Sep ’21 – 11:43am…[email protected] Ann Bailey,“The whole issue of funding needs our whole tax system to be subjected to a ‘root and branch’ overhaul NOW..”

    ……..This is just wishful thinking. It’s not going to happen………..

    What is ‘wishful thinking’ is that the Health/Social care system can be fixed any other way..BTW.. junior minister Nadhim Zahawi says it would be “arrogant” to suggest the problems can definitely be fixed by this NI rise.

    Anyway, you, somehow, managed to translate my ‘root and branch overhaul’ into a ‘1p income tax rise’; that is not what I wrote..
    The British tax code has increased from 800 pages, in 1966, to over17,000 pages in 2015..In contrast the Hong Kong tax code (widely held by tax lawyers to be the most admirably efficient in the world) is just 276 pages long….
    “The longer the fence the more holes”!. The cynic in me points out that such legislation favours the wealthy who, in turn, shape the legislation
    A few years ago the Guardian ran an article highlighting the fact that, although ‘questionable’ tax evasion stands at around £70 billion, there are just 300 HMRC employees investigating that incredible figure whilst 3,250 Department of Work and Pensions employees are chasing the estimated £1.2bn of benefit fraud..Priorities???

    The estimated 1.8bn a year for social care over the next three years, even if spent wisely ( which I doubt) is just another example of ‘kicking the can down the road’..You can’t mend a broken leg with sticking plaster..

  • Nonconformistradical 11th Sep '21 - 12:04pm

    @Simon R
    Tax loopholes – I’m no more reassured than is Barry Lofty.

  • Ann Bailey seems to have a good grasp of the issues “Decades of crises in Social Care are being allocated just 1.8bn a year for social care over the next three years (thee Health Foundation suggests at least £6bn extra a year is needed to keep social care from further deteriorating in England.alone)…”
    “It has been said many times that ‘Scandinavian Health/Social care cannot be got with US type taxation’..The whole issue of funding needs our whole tax system to be subjected to a ‘root and branch’ overhaul NOW..”
    The complexity of UK tax law is the basis for much legal tax avoidance and needs to be simplified. Merging income tax and NI into a single tax rate payable on all sources of incomes would be a major reform. The tax would apply equally to wages, self-employment earnings, investment income, rental income and indexed capital gains.
    The government announced £25 billion of tax increases (mainly corporation tax) earlier this year. This latest £12 billion increase is not the last we shall see. I expect there will be further announcements in the Autumn,
    There is one tax that cannot be avoided by transferring income offshore or disguising remuneration as gains i.e. a Land Value Tax on property.
    The social care reforms won’t prevent houses being sold to meet care costs, it just defers it, which is what happens at present with deferred loan arrangements.
    Anyone with a property worth over £100k (virtually all retired homeowners) will have to pay all care costs up to £86,000 from their estate at death. This limit does not include so called ‘hotel costs’ for accommodation services in care homes and nursing homes which remains uncapped. The catastrophic costs incurred by those unfortunate enough to spend the last five or ten years of life in a £1000 per week nursing home remain. The simple answer is spread the costs across all property owners in proportion to property value. In this way everyone contributes and at the same time is insured against excessive costs – this is what social or national insurance is supposed to mean, whether you find yourself unemployed, stricken by illness or incapacitated by old age.

  • Peter Martin 11th Sep '21 - 2:49pm

    @ Anne Bailey,

    “Anyway, you, somehow, managed to translate my ‘root and branch overhaul’ into a ‘1p income tax rise’; that is not what I wrote.”

    Neither did I. Maybe you are confusing me with someone else?

    What I did write was:

    ‘The killer question will inevitably be “How are you going to pay for it?” If you don’t have any better answer than put a penny on income tax for this, another penny for that and another few pennies for the other, with some NIC and VAT rises thrown in for good measure, you won’t get enough electoral support.’

    I’m all for simplifying taxation legislation but I’m cynical enough to think that a “root and branch overhaul” would mean that 17,000 pages would then become 27, 000 pages.

    Did you look up what Stephanie Kelton was saying?

  • Peter Martin 11th Sep '21 - 2:57pm

    @ Joe,

    “The simple answer is spread the costs across all property owners in proportion to property value. In this way everyone contributes and at the same time is insured against excessive costs – this is what social or national insurance is supposed to mean, whether you find yourself unemployed, stricken by illness or incapacitated by old age”

    I’d go along with that. And it could be arranged that no one need pay before they died or the property was sold. But isn’t this what the Labour govt was proposing over a decade ago and was then widely dismissed as a “death tax”?

  • Nonconformistradical 11th Sep '21 - 4:25pm

    @Joe Bourke
    “Merging income tax and NI into a single tax rate payable on all sources of incomes would be a major reform. ”

    Firstly – Would it necessarily be very complex (and costly) to implement this?

    Secondly – if you’re proposing a single rate tax, given that the less well-off are likely to spend a (possibly much) larger proportion of their disposable income on the bare essentials – food, roof over head, clothing etc. – than the better-off this would be disavantageous to the less well-off would it not? Increasing inequality?

  • Peter Martin,

    spreading the costs across all property owners in proportion to property value, so that everyone contributes, is insured against excessive costs and can defer payment until a property is sold or bequeathed is exactly what the residential land value tax does.
    Labour’s so called ‘Death tax; proposals came from (and still do come from)Andy Burnham.
    This is what he has to say on Land Value Tax
    “…I am setting out a plan for a radical reform of the tax system. At its heart is a land value tax (LVT) – an idea so old-Labour it can be traced back to Thomas Paine. But it is also a plan that draws on the best instincts of New Labour. The LVT, an annual tax on the market rental value of land, would allow for the abolition of stamp duty – a tax on the aspirations of young people to put down roots and get on in life.”

  • Nonconformist Radical,

    the office for tax simplification was as the name suggests set-up to simplify the tax system. It is they who have been calling for a merger of tax and Ni
    The Mirrleesreview made the same observation
    “The review recommends that the rate structure of income tax should be simplified, and income tax and NICs should be merged.”
    “The key principles that underlie the proposals are that the tax system should:
    – be designed as a whole, in conjunction with the benefits system. The system as a whole needs to be green and to be progressive. But not every tax needs to be green or progressive. Indeed, not all should be. The way taxes (and the benefit system) fit together matters very much.
    Higher personal allowances (or the equivalent tax credit) combined with taxes on property wealth and higher equivalent rates of tax on investment and rental income to that of earnings and self-employment can do the work of progressiveness in a more egalitarian fashion than penal rates of income tax.

  • Peter Martin 12th Sep '21 - 11:41am

    @ Joe,

    We should also include the value of the assets on any land so LVT probably wouldn’t be the correct term. There doesn’t seem to be any justification for treating someone in a small property on a large area of land more harshly than someone with a large property on a small plot or even no land at all if it is an expensive apartment in a high rise building in the city.

    Equally we shouldn’t just tax a mine or an oil rig on the land that it might occupy. The assets under the ground are equally, if not more, important.

    But who else in the Lib Dems is speaking up for what has been labelled a ‘death tax’? It seems to have been enough to kill it off but I don’t have any problem with it. The class system we have is largely the product of inherited wealth. It would be much better if we didn’t have any at all.

  • William Francis 12th Sep '21 - 7:42pm

    @Peter Martin

    If inherited wealth was all there was to the British class system, it would have been killed off during the massive reductions in the wealth shares of the top 1% which started just before WW1 and lasted until 1984.

    Professionals and managers have been more than able to use high incomes, skills, and connections to get their children into decent work during said time (indeed even late Victorian small business owners were known for getting their sons into well-paid clerkships in insurance and banking), and did so well before they died.

    Non-inherited wealth also plays a role. The professional and managerial classes were able to accrue substantial wealth in the past several decades due to lower taxation and being able to use their greater disposable income to buy assets in real estate and the stock market. The ultra-low interest rates of the past decade accelerated these trends.

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