Merryn's Blog

Where to get £900m to spend on social care

Get rid of inheritance-tax relief on gifts to charities – and you’ll have an extra £900m to pay for social care, says Merryn Somerset Webb.

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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.

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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.

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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).

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