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Think tank proposes care payroll tax

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Independent think tank Reform has said a payroll tax could be used to fund future care liabilities.

Social Care: A prefunded solution projects that the cost of long-term care will rise from £19bn to £30.5bn over the next 20 years.

Reform states: “Prefunding later-life care would be a radical departure from the historic approach to welfare policy in the UK. However, such action is essential if policymakers are to resolve the sustainability and fairness questions that have plagued social care services for decades.”

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Under the proposals, working age people would contribute a percentage of their income into a Later Life Care Fund (LLCF).

Reform says Germany’s Pay as You Go social insurance scheme offers a guideline for contributions which are set a rate of 2.55%, or £60 a month. Contributions could be split between employers and employees.

It also highlights Japan’s insurance scheme which takes contributions closer to the pension age, between the age of 40 and 65, in order to predict future liability more accurately.

Reform adds that France’s approach in which assistance for all incomes groups ranges from 10% to 90% of assessed care costs, dependent on the financial means of the person, could secure the LLCF’s legitimacy without incurring excessive costs.

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The author Lee Peart

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