Libertarian Tories will rue waving through social care tax trick – Telegraph.co.uk

Manifestos regularly promise not to raise income tax, VAT, or NICs because such acts are believed to be politically costly. Proposed tax hikes to major revenue sources make us question: what exactly am I getting for my money, given Im already paying a high rate? But raising the new health and social care levy from just 1.25pc to, say, 1.5pc or even 2pc of earnings? That at least sounds much less of a big deal and is likely to elicit strong support from the key beneficiaries: the elderly. In that sense, the levy relaxes the political constraint against tax hikes.

The revenue-raising potential of softly hypothecated taxes is exemplified at local level. Since 2016-17, councils have been able to charge an adult social care precept, which currently allows them to raise council tax by an extra 3pc in the nameof part-funding social care overtwo years. Its well used of 152authorities with adult social care responsibilities, 148 utilised some, or all, of their precept freedom this year, with 100 authorities opting for the full3pc addition.

So what has happened to overall council tax bills since the precept was invented? The average annual increase in Band D council tax payments was 0.8pc per year between 2010-11 and 2015-16, as central government sought to keep bills frozen. Since then, the average increase has leapt to 4.2pc per year. Yet council tax has, if anything, become a less salient political issue with the separate precept line present. Theres good reason to expect this new levy to be the thin end of the wedge and a catalyst for bigger government.

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Libertarian Tories will rue waving through social care tax trick - Telegraph.co.uk