Where to get £900m to spend on social care

Two donkeys © Getty Images
Donkeys are all very well, but the money could be better spent elsewhere

Are you a cash strapped government looking to make £900m in a hurry? Perhaps to add to one area of your budget where there has been a spot of trouble recently? Want to do so by taking from the dead, not the living – and by taking advantage of the UK’s super high house prices?

Good news. I have just the policy for you: cancel all inheritance tax relief on gifts to charities with immediate effect.

According to accountancy firm UHY Hacker Young, the relief claimed rose by 16% last year to £880m (up from £760m the year before) as individuals who die later and so know that their child have “already built up substantial savings by the time of the death of their parents… feel increasingly comfortable leaving money in their wills to charities.”

You might find this heartwarming. I find it mildly shocking.

The UK has just spent two weeks in a state of intense hysteria about the cost of social care and how on earth we pay for it. The idea that the old should use the built-up equity in their homes – or indeed their other wealth – for it was dismissed out of hand. What of their children, said almost every commentator. Why should they be done out of their inheritance to pay for care?

I disagree on that (see my column here). But even if you think it is never right to step between an adult and his parents’ money, what of this cash for charity? That has nothing to do with the children or the preservation of the family home. It is going to other charities – the National Trust, perhaps, or one of our many squirrel or donkey charities.

I have no problem at all with people leaving their money wherever they like, and fully accept that many charities deserve lots of funding. But I do think that in the main we should be aiming to pay for the core services we expect the state to provide before we hand out tax relief all over the place.

So let’s at the very least let the state collect the inheritance tax that should be due – and spend the £900m it gets from it on the social care we demand. This won’t solve the whole problem, but it’s a good start.

Next up is limiting the annual charitable relief people can get on income tax. That should solve many more problems (see my previous columns on charitable tax relief).

  • Jim8888

    Good idea Merryn which, as such, will have absolutely no chance of being picked up by those in Westminster who know better. There are a myriad of others. How about stopping freelancers setting themselves up as corporations to avoid tax? Self-employed people who don’t pay themselves a salary, but “dividends” from their childcare or plumbing business? Really cracking down on all the tax avoidance schemes that we don’t hear Gary Barlow is a member of? Apple Google, Starbucks, Amazon…..it’s just so much easier to tax the salaried middle class property owners, isn’t it?

  • A Frith

    Sensible people save and invest in order to enjoy a comfortable retirement and that includes any social care necessary. My only objection is that no first class social care actually exists for even those who can pay, so no incentive to save for this purpose exists. We all get the same rotten service and only some of us have to pay through the nose for it. The rest get it for free, and much good may it do them.
    The other reason we save and invest is in order to protect and support our children, and my word, they need it. Full time jobs, adequate pensions, affordable home – these are just dreams for many of them. Passing the accrued wealth of the older generation on to them is their only hope for security in their old age.
    Really the best bet is to hand the cash over whilst we are still alive, and hope to survive exactly seven years.

  • Andrew Crow

    I have some sympathy with the idea that it is possible under present rules to use allowances for charitable giving to support areas of social activity which we feel are neglected by allocation of government spending.

    I also have some sympathy with, for example, the anti nuclear campaigner who wishes to ‘punish’ the government by depriving it of revenue for Trident renewal (even though in monetary terms it is no more than a gesture)

    On the other hand I feel there should be a balanced appreciation of public/taxpayer input into personal wealth and an acceptance that it may be entirely justified that the government claws back, after death, some of the money that went into mortgage tax relief and other tax efficient initiatives which have contributed to an individual’s accumulated wealth.

    That the RSPCA should be better funded than the NSPCC clearly indicates we as a people have some pretty screwed-up priorities.
    On the other hand a civilised society should not even have an NSPCC – it should be quite unnecessary.

    There are many organisations whose charitable intent is questionable and there is not sufficient demarcation between what we would regard as a charitable organisation and simply a ‘not-for-profit’ enterprise. Or indeed a tax avoidance vehicle/scam as some no doubt are.

    Time to have a serious consideration of the whole charities and not for profit sector perhaps (?). I think the Charities Commission is probably overdue for a major overhaul. It would make sense to get the sector right before trying to adjudicate a taxation policy on it.

    Death duties and inheritance tax is really a whole separate can of worms and one which we really do need to get our heads round.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.