What do you think of Burnham's plans re inheritance tax?

[JoyousOpalLemur]

He has said in the past that he wants to abolish inheritance tax and replaced it with a social care levy on inherited assets, which will incorporate unused pensions.

I don't totally understand this if I'm honest - I think it means everyone will be dragged into the inheritance tax threshold, but it seems like a fairer tax than what currently exists, and it's there for a purpose (to fund social care).

What do you think?

https://www.independent.co.uk/money/burnham-prime-minister-money-taxes-mortgages-bonds-stamp-duty-b3001078.html

Agree

But would you support removal of 40%? just making a flat 10% on everything?

and this is the crux of the issue

Currently IHT goes to central Govn to pay for education, defence etc

If we only have the 10% IHT and all going to pay towards elderly care
whilst local Governments will end up with a much bigger pot
Central Government is losing out

I haven’t seen any discussion on this is news outlets or by Burnham or his ‘Fairer’ favoured organisation

So I’m guessing there will be more to IHT
That could possibly be a higher rate

However
The higher that is the more likely people will set up trusts etc to avoid it.
I doubt many would at 10%
but lots do at 40%
There’s a cliff edge to acceptance and at some point the tax man loses out

as long as everyone was paying attention- no weird trusts etc. sure. It’s really only on MN I ever see the view that potentially losing 10% of your estate WHEN YOU ARE LITERALLY DEAD is worse than potentially losing all of it (bar about 20k?) to care home fees.

But this is the Social Contract. Of course most people will happily sign up to it.

When it looks broken, however - when those taking out exceed those paying in, and some of those appear to be winning eg no care fees, the Social Contract seems to be just a continual fleecing of the schmucks in the middle.

Talking to my cousin on this her friends living in £300/£500k properties have and are setting up trusts
They don’t want to pay a penny in IHT even 10% !

This is why the Labour government desperately needs more behavioural economists on staff. They seem to constantly misunderstand how people will react to different fiscal measures, it’s honestly baffling how they keep getting things so wrong.

Or make it less cost effective if you hand over your property to kids in a trust

ie IF
trust held properties faced double the council tax
and
capital gains tax had to be paid on their sale ( pref a higher rate than IHT )
for example

Then people wouldn't do it because they’d lose out financially. Take the incentive away and behaviour adapts

That doesn’t make much sense

Those taking out more than they are paying in are people predominantly who "followed the rules" of the social contract all their lives. Specifically pensioners. Yes, even pensioners who started work at 16 and have grafted and paid into the system all their working lives. Not because they are scamming the system. Because they are living longer. Now it's not wildly unusual for a third of your adult life to be spent retired.
Some people exist who do lower paid jobs and therefore pay less taxes. We need those people and the work they do though. They shouldn't be viewed as a drain on the system. But even people who consider themselves higher earners/part of the squeezed middle (the scmucks in the middle you mention) can easily wipe out all the tax they ever paid if they take the state pension for 15 years and need hospital treatment.

The fantasy that there are large number of people abusing the system and we just need to find them and punish them and all will be well is just that, a fantasy. Currently the UK has the least generous welfare for the sick than all of G20 by some measures. Our spending on welfare as a percentage of GDP is less than most of Europe.

It's not work ethic, or young people being lazy snowflakes, or benefits scroungers. It's demographics. If the schmucks in the middle claim their pension and need care they will be part of the problem. Hence fixing the Social Care Crisis is a priority. But everyone feeling hard done by/persecuted won't help.

Its demographics

Why do so many not understand that demographics matter?

I don’t disagree about state pension costs/healthcare and I believe the triple lock must go.

BUT so must other costs be trimmed. The waste in public expenditure is terrible. I for one object to paying more and more tax when I can see absolute profligacy in some areas. Local government spending is a disgrace. Jaw-dropping.

Two things can be true at the same time.

Some people will be net beneficiaries of the welfare system either due to bad luck or through fulfilling a vital role in our economy that is underpaid compared to the utility it brings to society.

Some people will be net beneficiaries of the welfare state because they have made choices that have meant that they have heavily relied on the state when they could have done more to be more independent. Some have never worked a day, some have stayed in relatively easy, poorly paid work because it suited them and some have been financially irresponsible. Some have profited hugely from accessing social housing and benefits that have sustained them for decades and then they get old and rely on the state to care for them too. You claim that we have one of the lowest levels of welfare for the sick and yet our numbers dwarf other European countries. Do you genuinely think we are randomly much sicker than our European counterparts as a population?

So sometimes it is work ethic, welfare maximises and snowflakes. Our productivity is awful, our sickness levels are sky high and we have an astonishing number of NEETs compared to comparable European countries. This combined with demographics is a pretty heady combination. We can't hide completely behind demographics. There is far more going on.

Yep, look at SEN transport for example. The government has thrown money at local authorities as part of levelling up and green lit all sorts of very questionable projects. Burnham no doubt loved all of that as Manchester mayor.

We were world leaders in productivity up until 2007. After that date productivity flat lined. This happened in lots of countries in the immediate aftermath of the financial crash but unlike most other countries our productivity growth never recovered. Hence it is now very low comparative to other countries. The biggest single reason for this is likely Austerity. The Tory decision to slash government spending at the exact time conventional economics would say it should be increased. We now spend less money on infrastructure compared to similar economies (as well as less money on welfare), the NHS is also underfunded which affects productivity. Small schemes addressing children's mental health or literacy were cut and we are seeing the effect as those children enter the job market.

The big difference between us and other countries is Austerity. That's whT killed productivity. The answer to the problems caused by Austerity is not more Austerity. That's like setting your living room on fire and then deciding maybe if the kitchen is also on fire the two fires will cancel each other out.

If we get sucked into a cycle of paying for increasing welfare (state pension) costs and low productivity by cutting everything else (incl. Other welfare) we will be sucked into a doom loop. We need more spending to get ourselves out And since we can't easily borrow more, and many taxes have a depressing effect on the economy, and we can't let older people die in pain for lack of care, we need to find the money somehow. I know I seem overly invested in this but I can't think of a better way than inheritance tax.

Demographics… yes, but can we sustain a replacement population of which over 50% is economically inactive?

In the past housewives did not work, but they did not claim benefits. Now we have families in which women either culturally will never work or generationally - and they are state supported. And of course all the people on health-related benefits. It is worrying the number of dd’s friends who have kind of opted out after university. Once you’re in that Anxiety Layby you need to be earning quite a lot to make it worth getting onto the road.

"In the past housewives did not work, but they did not claim benefits"
Wrong

Overview of Children's Benefits in the 1960s
In the 1960s, the UK implemented significant changes to children's benefits, particularly through the Family Allowances program.

Family Allowances Act 1945
Introduction: The Family Allowances Act was passed in 1945, establishing a universal benefit for families with children.
Initial Payment: The allowance was set at five shillings per week for each second and subsequent child.
Universal Benefit: This benefit was not means-tested, meaning all families were eligible regardless of income.
Expansion in the 1960s
Inclusion of First Child: In 1975, the Family Allowances were expanded to include the first child, increasing the support for families.
Impact on Families: The program aimed to alleviate child poverty and provide financial support to families, reflecting the growing recognition of the need for social welfare

Social housing
In the 1960s, social housing in the UK expanded rapidly, with councils building about a quarter of all homes
With the reduction in social housing people are more likely to be in privately rented housing and claiming housing benefit to make up the difference

Overall, more benefits and support was provided to those who needed it in the decades after WW2 than now.

Which is another way I can't see it working - currently granny would agree a DPA with the LA and then they would get up to 80% or so of the property value when granny dies, rather than the 10% they would get.

That's on top of those with more money paying a lot less in IHT or "care levy".

If this does come in, I don't see it being implemented quickly, it will take a lot of setting up, just like the land value tax idea, its not the same as tweaking an existing system,

They sound terrible - honestly.

i hope they never moan about shit council services - while seeking to avoid paying further them.

30k - 50k of make believe money they’ve done nothing to earn. I’m embarrassed for them I think.

@Persephonia1966exactly, where did the narrative come from that previous generations didn’t get any help particularly when we know how much council housing we use to have!

people also overlook that increasing the pension age means more people who would have previously being classed as pensioners get pulled into the working category and due to increased ill health & disability more are economically inactive.

yeah, take everything, because all money belong to state, not to people who earn them.
People will certainly want to be even more productive
Communism is great

It will have real world implications for people though - I will likely inherit £400K of assets, half of the house I live in with my mum and a cottage left in trust worth £200K by my grandmother 35 years ago.

When I inherit this I will owe (under burnhams scheme) £40K, which I don't have, so the cottage will have to go, a family who have lived there and been great tenants will loose their home.

That's unless they keep the payment over 10 years system, which could be afforded.

are the proposals just for care home fees or the more common care in the home?

Would we not be better with a similar (but potentially non compulsory) system to National Insurance? You pay a fixed percentage of income monthly and then your care fees are covered. Don’t pay it then you won’t get your fees paid and will have to sell assets to fund your care.

call it a care insurance if you like.