If social care reform were any deeper in the long grass of political priorities, it’d probably get mistaken for a hedgerow. It got a one-line reference in the Queen’s Speech this week, which does not even guarantee that the ‘clear plan’ promised by the PM in his first speech in the job will be published this year. Announcing ‘a long-term plan for social care reform this year’ has been a quaint annual government ritual since 2017.
The Queen’s Speech also mentioned the need to clear the NHS backlog. Delays for treatment, already widespread before Covid-19 due to a decade of NHS funding increases lagging behind demand, are now the worst since reliable record-keeping began in 2007.
And house prices are playing in to both of these problems. Yes, really.
First up is the role of Inheritance Tax (IHT) and the cost of homes. Former chancellor George Osborne introduced the pensions taper tax in 2015, in order to offset reduced income from his tax changes (family homes passed between parents and children were exempted from IHT, up to a total value of £1 million).
Revenue lost here was recouped by reducing the annual allowance for pension contributions of £40,000 to a floor of £10,000 for those with ‘adjusted’ annual incomes of £150,000 to £210,000. That ‘adjusted’ income figure includes employer pension contributions (usually higher for NHS workers than for those in the private sector, as the NHS pension is a ‘defined benefit’ scheme).
Staff with a ‘threshold income’ over £110,000 can thus fall into the ‘taper zone’. Most senior hospital consultants and GPs’ wages start from around £77,000: many found themselves at risk of triggering the taper tax and big, unforeseeable retrospective tax bills (particularly if they do extra shifts or private practice).
This is a big problem, because there is going to be no way of clearing the backlog of NHS waiting lists without persuading these senior people to do extra sessions in the evenings and at weekends.