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Paul Lewis: Care Isa is not the answer to long-term care crisis

care isaCare Isa is just the latest in a long line of daft solutions from the government

Everyone agrees something must be done to plug the gap between the cost of care and the money available. At the present level of provision, the gap between what is spent and what is needed is expected to be £3.5bn a year by 2025, according to the Local Government Association. It is around £2.5bn now.

At the end of August, Newcastle University’s Institute for Ageing found the number of over-65s needing 24-hour care would rise by a third by 2035, and Age UK found older people and their families were bearing a lot more of the financial risk of needing expensive long-term care.

So yes, something must be done. But what? The problem has produced more daft solutions and been reported in more false headlines than any other.

Paul Lewis: Time to end this dangerous commission in disguise

The latest answer to this crisis is the Care Isa: a mad mixture of relief from a tax the vast majority of people never pay and with the promise of flexibility which every couple in fact already has. But more of that later.

First, some of the wrecks that litter the seabed of this ocean of misunderstanding…

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Brilliant, quite brilliant Paul. You must have been up all night thinking that one up. We can’t keep asking the tax payer to pay more and more. In recent years we’ve had VAT increased from 17.5% to 20% (that’s an increase of about £40Bn per year in revenue, sneaky increases to personal taxation (e.g. reducing tax-free allowance when earnings are more than £100K)and further increases in excises. So putting up taxes further is too simplistic and punitive to normal working people. We should look at compulsory savings schemes, with tax breaks, which we own to use on care, pension or legacy. Daft ideas? No, but will require some intellect and sponsorship to bring to fruition.

  2. Great Paul, let’s just keep raising taxes to pay for Govt inefficiency, lack of investing the Billions of tax paid to produce a return, loopholes for giant Corporates to pay less tax than SME’s and political fear of doing something about high earners pension tax relief.
    Have you not heard? Taxes go up, tax take goes down.
    Income tax, VAT, student loans, dividend tax, corporation tax, NI tax, Insurance tax, Motoring Tax, Stamp Duty Tax, Death (IHT) Tax, TV Licence Tax, Capital Gains Tax, Alcohol Tax, Fuel Tax, Pension LTA Tax, Pension AA Tax, Business Tax, Council Tax, FCA Tax etc etc

  3. Raising income taxes would impose a drag on personal spending (not a great strategy for a consumer-driven economy) and might even make it more difficult for the less well off to make ends meet (which is already getting tougher).

    What are you thoughts, Paul, on encouraging families to make advance provision for themselves by allowing tax relief on premiums to LTC insurance plans?

    20% tax relief on yearly premiums of, say, £200m p.a. would cost the exchequer only £40m p.a. (in context, a very small amount). A goodly proportion of this would be recovered in public sector administrative savings (isn’t that something the government is trying to achieve?), whilst income tax and NIC receipts from all those employed in selling and administering such plans would increase. Corporation tax from providers would also increase.

    Thus, the additional revenues generated by such a scheme could well substantially reduce (or even possibly eclipse) the actual tax relief cost to the exchequer, whilst at the same time stimulating employment and the economy in general.

    I’d be interested to read any argument, yours in particular, as to why this wouldn’t be a considerably better option than merely imposing higher taxes.

  4. Firstly, Paul, congratulation on being the first journalist that I have read who has actually understood the cap, how unfair it is, and how it will only benefit the very wealthy.

    In addition, it will also cost local authorities millions of pounds and they will need to employ an army of social workers to conduct care needs assessments, most of which will be pointless as those individuals will never benefit from the cap. They will also need a team of people recording and assessing every pound that everyone spends on care to ensure it counts towards the cap.

    I agree that the care ISA as it stands is a stupid idea. Anyone with an IHT problem is, by definition, unlikely to have a problem funding care.

    However, a care ISA might have some merit at it is deeply unfair that someone who is funding their own care has the drag of tax on savings and investments.

    Finally, I have one question for you. Why should I, and my children, have to pay extra income tax so that wealthy people can receive an inheritance from their family?

    The State already pays for care for those that cannot afford it. You cannot take it with you when you die, so the beneficiaries of this extra tax you propose, will be the children of people in care. That is quite a random way to distribute taxpayers money, don’t you think?

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