I am not having an election because I am going to stick to the 2024 manifesto on which Labour was elected. That’s Andy Burnham’s position, but could he be about to undermine it by levying a new form of income tax? It is being reported this morning that the Prime Minister is considering a new 1.8 per cent levy on income in order to meet the estimated £18 billion annual cost of his National Care Service. This is being considered as an alternative to the 10 per cent levy on estates that has already been floated. It would run alongside income tax but apparently wouldn’t count as income tax because it would have a name like ‘social care levy’, or somesuch.
No, I’m not going to be fooled by it either. A tax on income is an income tax, and any rise above the current level will represent a demolition of election promises. Burnham cannot possibly consider it unless he first puts it in a manifesto and calls an election. To try to fool us otherwise would be to go the way of Rachel Reeves, who claimed that her hike in employers’ national insurance did not break Labour’s promise not to touch national insurance rates.
An extra 1.8 percent on income tax would totally undermine Burnham’s claim to be focusing on the cost of living. That is true even if, as is being suggested, the extra levy would only apply to taxpayers over the age of 34. People just above that age threshold arguably have the worst deal of all: many are trying to bring up families on one or one-and-a half incomes. Their mortgage rates are soaring as they come off cheap fixed deals. They are not going to be impressed at having another 2 per cent of their income being hived off – especially when much of it is going to protect the inheritances of wealthy pensioners. Burnham would be creating a powerful engine of social inequality – exactly the opposite of what he preaches.
Nor would a social care levy stay fixed at 1.8 percent for long. If social care were to be made free at the point of delivery the annual bill would not stay at £18 billion. Elderly people who at present are happy to muddle through or to rely on help from other family members would suddenly apply for free care from the state. The bill for covering this would rapidly increase.
Compared with a levy on income, Burnham’s other idea of a 10 per cent levy on estates is less harmful, even if it promises to be extremely unpopular. For some reason which I have never quite understood, inheritance tax is one of the least-popular taxes, even when fewer than 5 per cent of estates actually pay it. It doesn’t take much imagination to see how unpopular it would be if a 10 per cent inheritance tax band was applied to all estates.
There is, however, a way around this. Why not ask everyone to make a choice, say by their 40th birthday. Either they opt-in to the National Care Service, in which case they will qualify for free old age care but will have to pay a levy of 10 per cent or so on their estate when they die (the proportion should be made variable up to a degree so that it always covers care costs). Or they can opt out, in which case they will be spared the 10 per cent levy but will have to meet all future care costs out of their own pocket. Once made, the decision could not be reversed.
That way, we could have socialism for people who wanted it and small state conservativism for people who favoured that. Burnham says he wants to govern the whole country and end factionalism. Here is a proposal which would allow as many people as possible to have the Britain that they want.
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