Labour rules out £20,000 death tax

    The government is thought to be considering introducing an inheritance levy on people’s estates as a way of paying for long-term care.

    It has strongly denied press reports that its forthcoming care white paper will propose a £20,000 flat fee on people’s estates after their death but it has not ruled out an inheritance levy per se.

    An option believed to be on the table is a care duty, which would see an extra 2.5% taken in inheritance tax from estates worth £25,000 or more.

    A Department of Health spokesperson said: “There is no decision yet on how the necessary reform of social care will be funded, but a £20,000 flat fee after death is not an option we are considering.”

    The denial effectively rules out one option mooted in last year’s green paper, which proposed the introduction of a compulsory insurance system to fund personal care for older people.

    One variation of this would involve a flat fee of £17,000 to £20,000 being recovered from the estates of people after death, apart from the poorest. However the government also suggested that people could enroll in the scheme on retirement and the fee could be means-tested.

    But despite the government’s denial, the Conservatives today accused ministers of “secretly planning” a £20,000 “death tax”, which it claimed would hit families on modest incomes hard.

    The Conservatives highlighted their own policy of offering people the chance to pay a one-off premium of £8,000 to cover the cost of residential care in older age, which it said would prevent people having to sell their homes.

    Counsel and Care chief executive Stephen Burke said the flat rate fee plan was “nonsense”, but a care duty was an attractive option because it was fair to all.

    He said: “The concept of an inheritance levy is right.” But he added that it was an open question over whether the government would plump for one option in the white paper or leave any firm decision until after the general election, which is due in May.

    Prime minister Gordon Brown left few clues yesterday on a way forward or when a white paper would be published when he delivered a keynote speech on health and social care at the King’s Fund.

    He said: “We recognise we will have to look at funding options and that’s what the white paper will have to elucidate and we recognise that some difficult choices have to be made.”

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