A care levy to fund our old age

Funding Care: how can each generation pay its fair share? by Donald Hirsch and Philip Spiers says each generation should take responsibility for their own care. This proposal has three parts:

Current elderly

As many of today's older people have not put aside funds to cover care costs, a first part of the Care Levy could be to have a modest tax on the assets they have built up. A tax on inheritance could meet the funding gap in caring for this generation.

Young People

Younger people pay through additional National Insurance contributions as part of the care levy. Each successive age cohort would have the inheritance part of the levy reduced to reflect this. People aged 30 or less introduced would pay enough to have no levy on inheritance.

Non-payers

In addition to these two parts of the care levy, care would be funded partly through general taxation as at present and through charges to users.

So, if you pay the levy for long enough you pay no extra inheritance tax. If you only pay a little, you pay the rest in inheritance tax. And general taxpayers pick up the bill for those who cannot afford to contribute and have no assets. Other non-payers get charged.

Hirsch said: "Finding funding for a new care system that is fair, transparent and sustainable across the generations is a big issue at the moment.

"This idea for a new care levy has several advantages: as well as being fair across generations, it would also be affordable, collectable, sustainable, ring-fenced and provide immediate revenue flow."

Test the practicalities

Julia Unwin, Chief Executive of the Joseph Rowntree Foundation, said: "We haven't yet tested the practicalities of this idea of a new care levy but it is an interesting option, and certainly one worth exploring, as it appears to meet our core criteria for a system that is fair, easy to understand and sustainable."

Julia Unwin added: "Getting this right is vitally important for us all. We need to consider all options in a calm and dispassionate way - and to base the final decision on what will work and deliver the security and care that all of us may need as we age."

"There is never a good time to suggest a new levy or an increase in taxation. But time is running out. We urgently need to look at all the options and work out, together, how we can fund care fairly, for the common good."

Obsession with inheritance

First we need to get over this obsession with leaving our amassed wealth to our children. We give them enough getting them started in life. Savings are for spending in the future. We should not expect to be able amass assets to pass on to our children and be looked after by the state. Users must pay.

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JRF report