By Harry Phibbs
Follow Harry on Twitter
The Government is proposing a cap of £75,000 on the amount the elderly pay for social care. This is to avoid them being forced to sell their homes. The Labour Party have criticised the plan for not going far enough – although they neglected to provide any reform at all during their 13 years in Government.
The cap is higher than the Dilnot report proposed. It is also higher than the Government had wanted. Yet the reform will still address the worst unfairness of the current arrangement. At present those who make the financial effort to become home owners and to build up some savings are all too frequently finding their efforts mocked by the bills for personal care.
The disadvantage of the reform is that it means an increase in public spending. This will need to be paid for. What is so depressing about the Government's response to this challenge is to propose higher taxes, rather than looking to balance the spending increase with spending cuts elsewhere.
This country is now so heavily taxed that claims that further revenue can be secured through tax increases are becoming spurious. Conservatives, with our understanding that high tax constrains economic growth, should not be surprised that growth has been so derisory.
The Government proposes to increase National Insurance to pay for most of the bill for the Social Care cap. But a higher tax on jobs means fewer jobs, it means further constraining the prospects of economic growth.
Even worse is the effective increase in Inheritance Tax by freezing the thresholds. Politicians often cynically assume that voters support tax cuts for themselves and tax increases for others. But the popular revulsion at the unfairness of Inheritance Tax is so strong that this does not apply.
That was why George Osborne's pledge in 2007 to raise the threshold to £1 million on this pernicious tax was so popular even among many people who do not have assets worth over £300,000.
Allister Heath, writing in City AM this morning, blames the Lib Dems for the Inheritance Tax rise. Mr Heath is being kind to Mr Osborne. According to his biographer, Janan Ganesh, ditching the Inheritance Tax pledge was not something Mr Osborne resisted. A great mistake.
Bad politics. Bad economics. Bad morality.