11.25.15
by

The Social Care Precept: hitting the poorest hardest

Here’s George Osborne delivering his Autumn Statement:

Capture

But, assuming it is taken up, who will be the real winners and losers from the Social Care precept?

Arguing in the New Statesman back in July against rises in the Personal Allowance I noted this:

Council tax is highly regressive. In 2013/14, even net of Council Tax Support, it represented a staggering 13.5 per cent of the earnings of the poorest 20 per cent of households and only 1.9 per cent of the richest (source ONS) (6.4 per cent/4.3 per cent/3.1 per cent for intermediate quintiles).

Increasing Council tax bills to fund social care obligations will make this situation even worse. The proportion of earnings of the poorest quintile of households consumed by Council tax, including the precept, will rise to 13.9%.

And that poorest quintile will bear 13.7% of the £2bn cost of the social care precept (16.1%/19.7%/23.1%/27.5% for the remaining quintiles). Had the rise been funded through income tax, by way of comparison, the burden on the lowest quintile would have been 1.7% (5.1%/11.6%/21.9%/59.7% for the remaining quintiles). (Both calculations from Table 14A here).

So the precept will fall heavily upon the poorest households. I genuinely struggle to think of another tax raising measure, consistent with our direction of fiscal travel, which could place a heavier burden on the poorest.

But who benefits?

In March 2014, the National Audit Office published a report into Adult Social Care. It revealed, unsurprisingly, that 68% of users were adults over 65 (Figure 4) and that adults over 65 consumed 50.8% of all Adult Social Care spending (Figure 12).

Median pensioner incomes are, of course, higher than those for the rest of the population (say the IFS). And only a tiny fraction of those incomes are comprised of earned income – so the diminution in income consequential on a pensioner requiring care is modest.

Means testing for local authority provision (helpfully summarised here) should mean that the poorest pensioners benefit the most from the precept. But the lifetime cap on care costs – of £72,000 – will only benefit wealthy users of Adult Social Care.

So the social care precept clearly involves a transfer from the poorer. I do not have the evidence to say it is to the richer. But it may well be.

3 thoughts on “The Social Care Precept: hitting the poorest hardest”

  1. Or will it? Surely the poorest 20% are all part of the 20%+ households who receive Council Tax Benefit, which will shield them from any increase. The nature of CTB is that it calculates a theoretical amount of Council Tax that the claimant can pay and then picks up the tab for the rest. Well worth checking this out.

    Best wishes

    Chris W Drew. Twitter = @chriswdrew

  2. My pre Precept figures are net of Council Tax Relief, which is what I think it’s called these days.

  3. Pingback: Three golden rules for discussing progressivity | The Policy Sketchbook

Comments are closed.