Tuesday, 23 May 2017

You can keep your dementia tax, Mrs May

Returning to the subject of social care for the elderly, there is a typically Tory assertion that elderly care for home-owners is a handout - and a handout for the wealthy. Some have it that the middle classes have been hooked into the welfare system and treat this as a form of state funded assurance.

Some factors to consider here. Average annual cost is about £25k for an average care home stay of about two and a half years. Utilisation seems to be under ten percent of pensioners - to my surprise. It's an expensive do though, and elderly residential care by 2020 is going to cost close to ten billion per annum. In the broader estimation of public spending it is not vast but significant.

Theresa May's policy will come back from the dead eventually. Dubbed the Dementia Tax, it's mainly going to affect those who have misfortune. That's why it is unfair. Rightly or wrongly we have socialised this risk. Pensioners have paid tax all their lives and those who stand to inherit also pay tax. If you have a typical middle class income you can expect to pay around 25k in a single year. So yes, there is a justifiable sense of entitlement.

What May is now saying is if you happen to be one of the unlucky ones, well, fuck you. Your assets will be liquidated and passed on to Beardie Branson or some other care provider. We are doing away with socialised risk. If you've built something and paid tax all your life, you'll pay a penalty if you get sick.

Whether socialised risk is right or wrong is really not any of the government's business. It is there to carry out our instructions. It would appear from the outcry that the public have decided that on balance it is better if we have that level of provision. They pay for it so why not? We socialise it because the costs are wildly unpredictable - which is more of a problem than universality. 

Libertarians have it that this undermines the notion of personal responsibility. This is a uniform trait to those on the right who frequently exclaim "why should I pay in my taxes so that x can do y". I have been known for similarly robust posturing myself in a former life.

For me it comes down to one estimation as to whether we believe in the family institution. The idea that a family has continuity, a stake in society and over generations, the means to accumulate wealth and contribute - to be citizens rather than grazing on the land. This policy shatters all that. Though there may be a cap, the moment you do away with socialised risk it then creeps ever upward where on a long enough time-frame everybody is robbed of everything.

So it comes down to an estimation as to whether you think the middle classes should be liquidated (bearing in mind that whatever savings are made will not be returned to us in proportionate tax cuts).

Were it that my generation and those younger had equal opportunities to the previous generation you could make that case, but now, for most, home ownership is just a pipe-dream. Now you can say that there is then a lottery whereby it comes down to luck as to whether you stand to inherit anything or not, but look where the balance of unfairness is. Are we to condemn all of the next generation to a rent based housing sector? And do we really want to see that which was built liquidated and handed to corporates?

You can say it is a middle class subsidy - a handout for people who don't need it, but that's really a question of whether you value having an intergenerational class who actually give a fuck about their surroundings and have a bond with where they live. Take a walk down any street. You can always tell the rented house because it's the one with the shabby gardens and the broken gutter. Our history of social housing tells us what happens when everybody on a street is renting. Those which were not purchased under right to buy are now demolished. Bradford, where I'm from, has seen entire streets ripped down. Some entire estates have been demolished.

The social make up of the UK since World War Two has been defined by socialism and universality in care. We are told this is unsustainable and I rather suspect it is, and if we can break these costs out into separate silos such as matched payment assurance then that's both sensible and inevitable, but if we take the churlish libertarian view that no risk should ever be socialised, particularly in social care, then we are turning our backs on what has defined us for nearly a century. 

When people make their plans and live their lives they do so on the basis of a certain understanding. A bargain struck with society and we all in some way bend to that. This is the social contract. Now we ought to know by now that the social contract is not worth the paper it's written on, and government will from time to time rip it up - but only if we let it. This time the people are saying no. 
More to the point, if we do away with intergenerational continuity we are then in a state where more of us are forced to spend our income on rent, meaning that when we do retire, given how pointless pensions are now, given how savings under-perform, there is an even bigger bombshell down the road. 

This though all points to the inherent problems in a socialist society. Politics becomes a question of who is the entitled to what slice of the pie. In this there is no more effective lobby than the British middle class who managed to force a policy correction out of the PM in a matter of hours. It is fundamentally that which creates spineless politicians where generally the most is taken from the those with the least representation. Elections then become a barrage of give-aways.

In that respect, if we want to fix politics the local aspect of tax must be corrected where annual budgets must be submitted for public approval. The way it works now is everything goes to a central fund upon which many a promise is made. That which is notionally supposed to fund NI concerns has become general taxation. Without properly compartmentalised budgets the public cannot choose those risks it wishes to socialise. Personally I don't see a problem fully privatising the GP system and letting the market have its way with that grubby little cartel. There are your savings. There is no reason why it couldn't be free to the less well off either. 

Frankly I wouldn't want Britain to turn into a libertarian utopia because then we have an every man for himself society where everyone is on the make and the only ones covered by their own financial arrangements are those best able to conform - and that there are no social obligations beyond self preservation. This is all predicated on the somewhat bankrupt idea that a low tax, small state economy necessarily increases individual wealth.

In actuality, in the modern world there is no real alternative to big government. We have seen in India, where there has been a rapid growth in wealth, new developments are built but without the compulsion to provide proper infrastructure, you find skyscrapers with no sewage system. Gurgaon, India, is a boomtown of millions without a citywide system for water, electricity, sewers etc.
Without regulation, without planning, without a mandatory system to pay for upkeep of local facilities, infrastructure rapidly become decrepit, devaluing assets and property and harming trade. The state of roads in Africa is one of the chief reasons cited for poor agriculture exports. Private interests do build roads but not to any particular standard and only insofar as it directly benefits their interests. There is such a thing as the common good and if the free market was ever going to step in, it would have by now. This is why it is so necessary for Africa to build a tax base beyond mineral wealth.
In the UK where we have mature systems of governance we have layers of planning and rules where every externalities of every decision is weighed up. Many would like to see it all chucked on the bonfire but we wouldn't get very far without it. You can argue that some rules are obsolete and unnecessary but any reform has to be done with surgical precision rather than a machete. The net result of it though is a first world country with, cynicism aside, first class infrastructure.
As to how much of this should extend into the social sphere is a question for politics. The dynamic is the same whereby a system of welfare provision reduces the externalities of poverty and hardship and that has an overall intrinsic value. Ultimately it costs more down the line if people lose everything. So why let that happen?
We know there is an upper limit on tax tolerance, we know there is such a thing as the Laffer curve. We know there are increasing demands and rising costs. Some difficult choices have to be made. Our red lines are that a level of basic social care should be as close to universal as possible. That's a tall order. The only way out of this mess is to adopt a pro-growth agenda. 

If the public are ever going to consent to a further erosion of universality then they need the means to fend for themselves. In this I would ask why Filton Airfield close to Bristol, closed in 2012 still hasn't has a single house built on it? When is the credit system going to be fixed? Why aren't we being ruthless about all the barriers to housebuilding? Why are our pensions swallowed up in management fees? Why can't you get a decent return on savings? 
All I see is the gradual encroachment of corporates who, on licence from the government, are able to syphon yet more of what we have without our consent. When the means of self-reliance have been dismantled, you cannot expect people not to fight to keep what they have.

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