Yesterday's Observer reported that the Labour government is considering a policy under which households will pay £10,000-12,000 out of their estates to fund free long-term care for the elderly. The tax would be paid on retirement or out of the estate at death, thus amounting to a kind of inheritance tax.
This is surely an excellent idea.
At present, the costs of so-called social care for the elderly are not covered by central government, and provision differs across localities. Thus, many of those who need long-term care end up having to sell their assets to pay for it. This adds to the general lottery of the inheritance process. If you are lucky enough to have parents or grandparents who die without having to spend their own accumulated assets on long-term care, you stand to get a nice inheritance when they die. If you are less lucky, then you stand to be 'disinherited'.
That's the nature of the free market system, left to itself. Benefits are highly dependent on all kinds of 'brute luck'. How well off you are depends hugely on who your parents are.
One of the key objectives of social democracy is to reduce the extent to which people's wealth and life-prospects are at the mercy of brute luck. That's why social democrats support so many of the things they do, from measures to ensure universal quality education, comprehensive health-care provision, to the 'redistribution' of income and wealth.
The proposed inheritance levy is a fine example, I think, of this social democratic intuition at work. Instead of privatizing the risk to families that assets will be eaten up in the costs of long-term care, the proposal is to socialize the risk. Some people who will turn out not to need long-term care will pay the levy. They will subsidize those who do turn out to need it. But the result is that the costs of paying for the care are much more evenly spread and all families - or, at least, all families where there are significant assets to bequeath - will be able to live in greater security, knowing that, if long-term care is needed, they will not lose the family inheritance.
The proposal has the potential to be very popular. A few years ago, I did some deliberative workshops on inheritance tax with ippr. We looked at how support for inheritance tax is affected if one proposes to link the tax directly to specific kinds of spending. We gave the workshop partipants three alternatives: linking the tax to policies like the Child Trust Fund; linking it to education spending; and linking it to spending on long-term care for the elderly. The latter proposal was easily the most popular.
Of course, there is also the underlying problem that households differ radically in the assets available for inheritance. That's why social democrats ought also to support a general policy of taxing inherited wealth and using the proceeds to ensure everyone a decent sum of capital on arriving at adulthood - the principle of a citizen inheritance.
The proposed inheritance levy does not address this concern. Nevertheless, within its limited but important domain, it looks to be an excellent proposal, potentially achieving that (increasingly?) rare combination of being at once genuinely fair and genuinely popular.