Council tax hike being considered to cover social care costs

Ministers are looking at increasing council tax to pay for social care but have been warned that it will not tackle funding problems which are “out of control”.

Experts, including the former Tory health secretary Stephen Dorrell, have warned of a growing cash crisis hitting local government and the NHS.

The government is preparing to allow tax precepts to be increased so local councils, which have suffered reductions in government grants totalling more than 40% since 2010, can claw in extra cash to cover the spiralling social care costs.

Izzi Seccombe, the Conservative chair of the Local Goverment Association’s community wellbeing board, confirmed that the idea of an increase in the precept was being considered.

“We have had some dialogue with ministers about this,” she told BBC Radio 4’s Today programme on Monday.

But she said the money raised from such a move would not be enough. Seccombe pointed out a 2% increase in precept imposed by most councils last year raised only £380m, which was not enough to pay the £600m needed to cover increased staff costs under the “national living wage”.

She also warned that a rise in council tax would create a postcode lottery in services because richer areas could raise more than poorer areas where the need is greatest.

Seccombe called for emergency funding. “We need an injection now of £1.3bn because there is a shortfall by the end of 2020 of £2.6bn.”

Dorrell, who is now the chair of the NHS Confederation, said the shortfall in social care was spilling over into the NHS because discharged hospital patients had nowhere else to go.

He said: “What we are talking about is a cash shortage that is threatening the stability not just of local government but of the National Health Service. Unless we address this seriously, we will simply see a failure of service across the range of local public services and people will suffer as a consequence.

“It comes when people find they can’t have access to care homes, so they end up in A&E and GP surgeries. They can’t be discharged from hospital when they are fit and ready to go.”

Dorrell said he would welcome giving councils the flexibility to raise council tax for social care, but he called for a more “fundamental” rethink of both health and social care funding.

Martin Green, the chief executive of Care England, which represents care home providers, said hundreds of providers were on the brink of financial ruin.

He said: “Research recently showed 40% of care services will no longer be viable in the medium term so this is a huge number of care services that will be lost.

“The government needs to have a clear strategy on social care and if they don’t there will be a crisis right across both health and social care.”

Andrea Sutcliffe, the chief inspector for adult social care, told the Times: “The system is approaching a tipping point. We’ve got increased demand and potentially a restriction on capacity.

“Unless we really get to grips with some of these problems … we will get to an absolute crisis.”

Labour peer David Lipsey, who was involved in a royal commission on elderly care funding in the 1990s, added: “There could be mass closures of care homes.

“There’s a danger that poor people in poor areas will end up without care, living a squalid life. There could be care blackspots because the homes that are reliant on state funding will become unsustainable,” said Lord Lipsey.

The Lib Dem shadow secretary of state for health, Norman Lamb, said: “This is dreadful crisis management from the Conservatives.

“They are lurching from crisis to crisis and this is yet another desperate sticking plaster solution which falls short of what is needed. Making councils bear all the burden will increase the postcode lottery which already exists.

“It will mean that wealthy parts of the country will find it easier to meet rising demand whilst those areas where council tax raises less money will be left struggling.

“The government must be held to account for the consequences of leaving more and more people without the care they desperately need.”

Barbara Keeley, the shadow minister for social care, commenting on reports of proposed council tax rises to fund social care, said: “Asking taxpayers and councils to pick up the bill for the Tories’ failure is no substitute for a proper plan.

“It is time for Tory ministers to deal with the crisis they have created in funding social care and to develop a sustainable way of funding the social care on which vulnerable and frail older people depend.”

Council tax hike being considered to cover social care costs

Taxing Employer Overall health Insurance Would Hike Social Security Rewards But Increase Federal Coffers

The tax subsidy for employer-sponsored overall health insurance coverage is huge. Not only are the premiums exempt from cash flow tax, they are also immune from Social Safety payroll tax. The two subsidies mixed will include far more than $ 1.6 trillion to the deficit in excess of the following 5 many years alone.

But simply because that revenue is not included in the Social Safety wage base, some employees also lose out on potential retirement positive aspects. So what would happen if Congress repealed the exclusion for employer-sponsored insurance?

That query has a extremely complicated solution. The cause has a good deal to do with those Social Safety positive aspects, in accordance to a new paper by the Urban Institute’s Karen Smith and my Tax Policy Center colleague Eric Toder.

Total, the present worth of those more generous Social Security positive aspects offsets some, but not all, of the higher taxes. But for some workers—especially individuals at reduced incomes—those greater retirement benefits would more than compensate for their higher taxes.

Here’s why:

Taxing ESI moves three fiscal levers.  Since employer-paid premiums would be treated like wages, most staff obtaining ESI would shell out much more in revenue, Medicare, and Social Protection taxes. Individuals increased income and Medicare taxes would have no result on their long term Social Security positive aspects. But raising the wage topic to Social Protection taxes would boost benefits for some retirees.

The story will get complicated since each of these taxes has an effect on households in various techniques. For instance, extremely reduced earnings households who fall beneath the income tax threshold (about $ 19,000 for a childless couple) would not encounter increased cash flow taxes but would spend a lot more Social Safety and Medicare taxes. At the other finish of the revenue scale, workers earning a lot more than about $ 117,000 in 2014 will have presently maxed out on their Social Protection tax so even if their ESI is integrated in income, they will not shell out any far more of that levy. And since there is no wage cap and no floor on the Medicare tax, absolutely everyone would pay more of that levy.

All these crosscurrents would have important consequences, not just for family members incomes, but also for federal deficits and the well being of the Social Security trust fund.

Due to the fact most people paying greater taxes are not yet collecting Social Safety, the federal price range deficit would decline by about 1.six % of Gross Domestic Merchandise to start—roughly equal to the improve in federal receipts.  But as individuals workers start to retire and commence collecting bigger benefits generated by their higher lifetime earnings, the net decline in the deficit would moderate and typical 1.1 % of GDP more than the next half century.

Since increased payroll taxes would exceed benefit increases, taxing ESI also would increase the lengthy-term well being of the Social Safety trust fund. Even so, it would not fully eradicate the account’s projected long-phrase deficit.

The effects of this trade-off in between taxes and advantages would vary across and even inside income groups. General, the present worth of people larger Social Protection rewards from which includes ESI in 2014 wages would offset only about 22 percent of the combined improve in payroll and earnings taxes. But it would compensate for about 72 percent of these larger Social Security taxes.

Considering that Social Protection is progressive, workers in the lowest 20 percent of income would get a bit more in rewards then they’d shed in larger taxes. By contrast, households in the prime five percent of revenue would recover only about 1-third of their larger taxes in the type of greater future Social Protection advantages.

Over their lifetimes, all earnings groups would receive much less in rewards than they spend in taxes. Nevertheless, middle-income employees would face the biggest tax increase as a share of their lifetime earnings. By contrast, lower- and high-cash flow staff would be hit by considerably smaller net tax price hikes.

The bottom line: Getting rid of the tax preference for employer-sponsored insurance coverage would improve the government’s total fiscal situation as properly as the well being of the Social Security trust fund. But the increase in Social Safety rewards would affect different earnings groups in really complicated approaches. And although the Social Protection Believe in Fund would be strengthened by higher payroll taxes, that improvement would be mitigated by an enhance in rewards.

Taxing Employer Overall health Insurance Would Hike Social Security Rewards But Increase Federal Coffers