My Lords, I thank the noble Baroness, Lady Greengross, for this debate. Nearly 50% of social care expenditure is on working-age adults in this country, and every one of us is just one event away from the need for social care—so it is an issue not just for the elderly but for the whole society. With 18.4 million individuals on an annual income of less than £12,500 and median gross household savings in this country of only £11,000, hypothecated taxes, a higher basic rate of national insurance for the masses or insurance for the benefit of the rich property owners is not really the answer.
The best legacy that we can give future generations is a system in which social care is free at the point of delivery. Governments have bailed out banks, provided £895 billion of quantitative easing to speculators, thrown billions at contracts for cronies and continue to give billions in subsidies to railway, gas, oil and other companies. The Government can surely find resources to improve people’s welfare, too.
If the Government want to think in old-fashioned ways of tax and spend, they still have plenty of options without increasing the basic rate of income tax or national insurance contributions for the masses. Redistribution, as earlier speakers mentioned, is the key. Here are some things that the Government could do.
By taxing capital gains at the same marginal rates of tax as earned income, some £17 billion in tax, plus another £8 billion in national insurance, can be raised. Taxing dividends as earned income can raise £5 billion plus nearly £600 million in national insurance. By abolishing the current regime of tax reliefs on pension contributions, which mainly benefits the 40% and 45% taxpayers, and instead giving all pension savers a
flat rate of 20% relief, another £10 billion can be raised. Currently, 12% national insurance is levied on earned income below £50,284, and only 2% is levied above that—a highly regressive practice. An additional £14 billion a year can be raised by extending the 12% rate to all income. However, the Government do not wish to inconvenience their rich friends.
Those proposals redistribute income and wealth by removing anomalies and tax perks for the few. They do not impose higher taxes on the young or most workers. There are no shortages of resources for free universal social care; there is only a shortage of political will to improve social welfare.