As the Government pushes through its increase in national insurance contributions for employees, employers and for those who receive dividends and yet it continues to make the same mistakes that all Governments since the 1940's have made in attempting to pay the bills of today from taxes raised today.
The Labour Party continues to peddle the lie that all of society's problems can be solved by taxing the rich a little bit more and waging a tax war against multi-nationals. Of course both fail as the very wealthy are able organise their tax affairs to reduce tax liability and multi-national ultimately pass tax rises on to consumers as the Digital Services Tax proves.
It is right that services that benefit all citizens should receive a tax contribution from all citizens. Our problem is that the State consumes ever more resources without necessarily improving public services and there are inevitably unintended consequences.
The costs of social care is a burden that hits the middle classes hard most of whom have done the right thing all their lives and then find that they face losing their home to pay for care which many considered to have been covered through the taxes that they have already paid.
Rightly, the State continues to provide care to those who do not have the means to pay for it themselves but transfers some of that cost by negotiating much lower priced care home contracts subsidised by self-funders.
The increase in NI will hit all employees most of who will receive no benefit in the short term. It will cause problems as all tax rises reduce economic activity and increase the disincentives for those receiving benefits to re-enter the workforce. I have some sympathy with the argument that these increases in NI are protecting the inheritance for the offspring of the wealthier middle class who failed to vote for long term solutions in the past.
We need solutions that clearly address the the long term funding issue of social care. For me the Government needs to think creatively rather than continue to make the same mistakes of previous generations, here are a few thoughts: -
- There needs to be a clear contract between State and the Citizen on where the State's responsibility starts and ends in providing long term care.
- It is unfair that the better off in private care homes are subsidising State funded residents. The Government should consider a not for profit housing association style model for the provision of residential care for those unable to fund their own care.
- The additional NI contributions, not Employers NIC, for those under 45 should be placed in long term investment funds to pay care costs in the future for anyone over the age of 75. It will be necessary to provide a legal framework to stop a future Government requisitioning those funds for other uses.
- Those in work aged over 45 should be encouraged to start saving for their long term care with the Government allowing a proportion as tax deduction this would be in the taxpayers long term best interest.
- The Government must ramp up its public health message to encourage all of us to lead healthier lives in order to reduce the risk of needing long term care as we get older.
The increase in the tax on dividends, when added to increases in corporation tax, will hit a swathe of enterprises reducing the incentives to take the risk on setting up a business and will dissuade investors that Britain is an enterprise economy worthy of investment. Despite what the left says the wealth that funds public services comes from the private sector.
Boris Johnson tax policies are looking distinctly Corbynesque I find myself asking the unthinkable question when will Boris introduce a wealth tax?
