Morning Line: perhaps Andy Pandy can do a better job on 'death taxes'

The detested ‘death tax’ has hit the headlines again. Andy (Burnham) and Andrew (Lansley) are at each other’s throats over the vexed issue over paying for long-term care for the elderly. Poor old Andrew (Dilnot) is sitting in the middle. What are we to make of it all?

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by Gavin Lumsden on Jul 21, 2010 at 12:09

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The detested ‘death tax’ is hitting the headlines again. Andy (Burnham) and Andrew (Lansley) are at each other’s throats over the vexed issue over paying for long-term care for the elderly. Poor old Andrew (Dilnot) is sitting in the middle. What are we to make of it all?

Health minister Andrew Lansley’s decision not to rule out a ‘death tax’ option from the Commission on the funding of Care and Support he launched yesterday has sparked a predictable row.

You can understand Andy Burnham’s frustration. Who knows, the anger of the former health secretary at his Tory opponent may even be genuine? Before the election Lansley launched the infamous RIP poster lambasting Burnham’s proposal for people to pay £20,000 towards their care – money which controversially could be taken from their estate – when they became too ill or infirm to look after themselves.

Now Lansley is in power and we are embarked on the Age of Austerity and nothing is being ruled out. Ominously, Dilnot – whose day job is principal of St Hugh’s College, Oxford – is being told to frame his year-long inquiry with the upcoming spending review in mind.

When it comes to the difficult decision over how to fund a care system for the elderly that means nothing is ruled out. Lansley’s previous proposal of an insurance-based ‘home protection scheme’ is one option but with individuals inevitably being asked to go in ‘partnership’ with the state, so is a levy on people’s assets when they die.

It is good to see that someone of Dilnot’s calibre is in charge of this independent review. Dilnot made his name at the Institute of Fiscal Studies where, like his successor Robert Chote, he regularly dissected the government’s Budget claims. Presumably his appointment means he is out of the running for being the next chairman of the Office for Budget Responsibility. No matter, this is a crucial policy issue that will have profound impact on the economy and the national budget.

This is so key an issue that there is no political consensus. As the Telegraph points out, the commission has been set up because the coalition is split on the issues. The Lib Dems were no fans of the ‘opt-in’ nature of the home protection plan after all.

So what does this mean for us? It means that on top of saving for our pension, we need to save towards the likelihood of our needing care in our old age. This is an intimidating challenge given that two in three women and one in two men will need high levels of care in retirement, with the average care bill costing £30,000.

Death taxes may be hugely unpopular but we need to get used to them - or their equivalent. After we have paid our share in the form of tax or insurance or increased saving, there will be precious little left over to pass on to our children.

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11 comments so far. Why not have your say?

It is the level of fees payable that needs to be addressed. Most accept that IHT is a "just" tax that can be avoided or mitigated by careful planning. Taking 100% tax over £14k, which is the effect of paying for long term care, is seen by most as unjust.

A reasonable contribution towards care that also allows a reasonable estate to be left by those who have both paid their taxes and still managed to save to buy their own home etc. would be far less contentious.

Making the careful pay for the couldn't-care-less will never win any votes from honest hard working folk.

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Clearly, there shouldn't be double taxation, ie., IHT as well as Death Tax. To the extent, therefore, that IHT exceeds the Death Tax , it should be taken as "franking" that tax.

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All forms of tax should be examined in terms of simplyfication of our very complicated system which by its nature is far too costly to administer. It doesn't matter if you call tax death duties or empoyers contributions they are still tax levied by government to support our very top heavy public sector. Which is entirely negative as far as UK Ltd, or England Ltd if you prefer. The governments strategy must be to support those parts of the private sector with genuine overseas earning capacity, this should include the likes of BP whose well being is important to the UK. So far it is too early to say if this government will achieve much. What is certain is that it could not possibly be worse than the altertantive.

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I seriously doubt whether "most people" liable to pay it view IHT as a "just" tax as an earlier poster asserts. Yes it can be mitigated, but for those liable to pay IHT, who are not extremely wealthy, mitigating it by giving away assets invlolves a degree of risk if you might need those assets to pay for care in old age. In addition 13 years of Labour have seen successive attacks on the Trust regime, which have significantly reduced the value of that approach.

I certainly agree that if any government is stupid enough to levy a death tax it should be able to be set against any IHT liability.

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The reason "most" people deem IHT a "fair tax" is simply that most people do not pay it.

IHT can be mitigated as can Care fees, but mitigation or avoidance means doing something rather than doing nothing which is what most people do and that is why it is regarded as fair game.

There is no need to give away assets that you may need in the future; the sensible option is to use a Trust and the right ones still do the job.

If you want to avoid IHT and Care fees get the right advice from a well respected IPW member and it won't matter what "taxes" are introduced - you will not pay them.

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death duties will never change means testing will be around for ever.

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Message to Clive Oram,

Who is IPW member? And how do we get in touch with this sort of person?

Please advise and thank you.

Philo Da Cuna

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Philo

IPW is the Institute of Professional Willwriters. IPW members have to pass exams in order to be a member and are approved by the OFT.

Visit IPW.org.uk to find a local member. I can be contacted via info.affairsinorder@tiscali.co.uk

I hope this helps.