Workers face new 1.8% tax as Burnham grapples with social care system

MILLIONS of workers are at risk of being hit with a new tax on income to fund social care under plans being considered by Andy Burnham. Civil servants have put forward proposals that would see workers contribute to a privately managed fund to pay for their care in later life. The plans have been drawn up by officials in the Department for Health and Social Care and could fund a new care system costing £18billion a year, according to the Telegraph. It is understood that civil servants have put forward several new funding models for social care last month, after Burnham said he would use “whatever political capital I have” to fix it. Sign up for the Money newsletter Thank you! He said: “This comes down to a choice. We can carry on passing the problem to the next generation, or we can face it head-on and work together to build a care system that gives people dignity, security and the support they deserve.” The options being considered include a new levy on income, which would be charged at 1.8% of earnings above £6,240, which would be paid by workers over the age of 34. It would be invested on behalf of working-age people to fund care when their age group nears the end of their life. It would be different to National Insurance, which pays for current government spending. Meanwhile, wealthier elderly people would pay the levy and between 10 and 45% of their own costs, depending on the assets they have. The proposals come after opposition to a 10% tax on estates, which Burnham has previously been in favour of. Most read in Money It is understood that Whitehall officials have asked for advice on this model from health experts, including three think tanks. The proposals were first put forward by Re:State, a public services think tank where Mr Burnham was previously an adviser. In a paper published by the group it suggested a mandatory contribution to a national fund, which would see an employee on a £50,000 salary pay an extra £788 a year in tax. Meanwhile, an employee earning £80,000 would pay an extra £1,327. Another option being considered is a “pay-as-you-go” system, which is used in Germany and Japan, where workers’ contributions are used to fund the care of the current elderly population. It is understood that Burnham will wait for the conclusion of an independent review being conducted by Baroness Casey before it makes a decision about social care funding. Catherine Foot, director of the Standard Life Centre for the Future of Retirement warned: “Adult social care reform is one of the most heavily delayed policy issues we face today, with successive governments struggling to find cross-party consensuses on addressing the challenges. “But that shouldn’t be a reason to kick this into the long grass.” The Department for Health and Social Care was approached for comment. 4 comments4