Prime Minister Andy Burnham has signaled that tax increases are a possibility to fund a comprehensive reform of social care, an area he has long championed. While declining to specify which taxes might be raised, his Work and Pensions Secretary, Pat McFadden, did not rule out a 10% levy on all inheritances. This potential "death tax" could generate an estimated $18 billion annually, a substantial sum given that the government collected $9 billion from inheritance tax last year, but social care spending is projected to reach $39 billion by decade's end.
Burnham has been under pressure to outline how his government will finance its initiatives, especially as his initial pledges have reportedly reduced the government's "fiscal headroom" (the amount it can spend without breaking debt rules) to $8 billion. Critics, including the Conservative opposition and groups like Reform UK, have warned against increasing the tax burden on families, arguing that a blanket 10% inheritance tax would unfairly affect many who historically haven't paid inheritance tax. Currently, fewer than 5% of deaths result in an inheritance tax charge, and opponents fear this new levy would impact millions of people nationwide.
The idea of a "care levy" or a 10% levy on estates to fund social care is not new; Burnham first proposed a similar concept more than 16 years ago when he was Health Secretary. Downing Street has stated there are currently "no plans" for a blanket 10% levy, and a government spokesperson emphasized the need for a broad consensus on fixing the social care system, with any funding mechanisms likely to be finalized closer to the Budget. Despite this, Burnham remains committed to reforming social care, asserting that failure to do so will lead to the collapse of the NHS due to its burden of caring for individuals who could be better served through a reformed social care system.
