Monday, 20 March 2017

They own land! Give them money!

From The Guardian:

The cost of an average stay in a residential care home can swallow up more than half the value of an individual’s house in some parts of the country, according to new research.

The findings, which show that the typical person entering residential care will face a total bill of £50,000-£93,000 depending on where they live, will fuel the debate about social care funding.

The chancellor, Philip Hammond, announced in this month’s budget that an extra £2bn would be granted to social care in England over the next three years. He also said the government would produce a discussion paper later this year that looks into how to fund social care in the future...

The new research from the mutual insurer Royal London, whose director of policy is the former pensions minister Steve Webb, found that variations in house prices around the UK mean the cost of a typical residential care home stay could range from 18% to 56% of the value of the average house.

Webb, a former Liberal Democrat MP, said successive governments had “failed to grasp the nettle” when it came to care costs, and that urgent action was needed.

18 comments:

Bayard said...

Note the sliding into the public consciousness that heirs have a right to inherit their parent's home. Once you get past a certain age, it's not your house any more, it belongs to your heirs. You are not allowed to sell it to pay for your care in your old age.

This is the problem with large-state socialism: the more the state does, the more people expect it to do. Once people expected to provide for their old age and one of the main ways of doing that was to have children who would look after you. Enter the welfare state and within a few generations, it is expected, not unreasonably, that, in return for handing over about half of your income in tax, the state, not your children is the one that will provide for you when you get old.

Mark Wadsworth said...

B, to sum up, people hand over half their earnings in tax to preserve the inheritance if a small minority?

Graeme said...

Is this a conscious policy? Is the YPP policy to ship oldies to the Isle of Man? Or is it another example of DBCs beloved fascism in action?

Mark Wadsworth said...

G, are you just slinging mud or interested in YPP policy?

If the latter, then YPP policy is universal entitlement to welfare including care costs, regardless of contributions, assets, income etc, The point is that YPP would pay for it out of Land Value Tax, not out of income tax. What Steve Webb and his ilk are angling for is special subsidies for home-owners.

Lola said...

MW. I am not sure that Webb understands per se that he is arguing for special subsidies to land owners. I think he just sees political advantage in trying to get other people to pay of other peoples inheritances.

FWIW I have this precise discussion with clients on a regular basis. Most of them, the vast majority, are perfectly happy to access their house 'wealth' to pay for care. And so are their children. Of course they'd like to leave some of this 'wealth' to their children - which is where we come in...:-)

formertory said...

Bayard's hit the nail on the head.

I agree with Lola about the blindness of politicians to special-interest subsidies. They trot out the "hard working families / pensioners / nurses / whatever" mantra and justify any amount of economically damaging short term vote seeking. Just wait until interest rates rise and mortgage payments double; blood in the streets and pols trying to spend other peoples' money to keep "hard working families" in houses they borrowed too much money on because of simple greed.

This whole inheritance thing (amongst those of us who aren't of wealthy antecedents) only kicked off a few decades ago. Now you'd think it's every man's (or woman's or whatever other descriptions are need to remain politically correct) absolute right. I'm pretty sure in my own mind it's one of the corrupted blow-bys of Margaret Thatcher's "nation of homeowners" policies; selling off local authority housing at huge discounts because rent had been paid for years really kicked off the whole tax-free capital gain circus. Was shelter and security worth nothing over all those years?

I'm by no means anti-Thatcher; she did a lot of good no one else had the balls for. But some stuff didn't half go wrong.

formertory said...
This comment has been removed by the author.
formertory said...

I should have known that if I went back and re-read the article I'd find something I missed the first time round :-) . Stupid boy.

DBC Reed said...

@FT Thatcher's home owning democracy was corrupt in essence. Now that house prices are too high for anybody to afford (bound to happen), Theresa May, denouncer of the nazti party, is trying to shore up her shaky majority by,herself, courting the naztis , whom old style patrician Tories wouldn't have touched with a barge-poll. She is apparently trying to get some free market European deal with these slime balls in tow ,who are only interested in anti immigrant CONTROLS while the economy can go to fuck as far as they are concerned,as they own their own houses and can fiddle an untaxed income.To make matters worse the fall in the pound will make Brit property cheaper so keeping the (bwoken) property market over-inflated.
Not my country any more.

formertory said...

Oh, c'mon DBCR, how is a homeowners' democracy corrupt in essence? I'd agree that the implementation was poor, possibly corrupt in patches (or at least too easy for rent-seekers to exploit). Then to cap it all, you say, it was bound to happen that prices are too high (without actually describing the mechanism that apparently makes it inevitable).

Err, no. Ill-advised and badly thought out incentives resulted in prices being too high - greed. It could have been nipped in the bud by taxing unearned property profits, or taxing the ownership of the asset (wasn't that Schedule A?) or by MW's preferred option. There seems not to be more than a handful of debt slaves out there who understand that pouring all your wealth / income into property is a stupid risk especially if you're leveraged to the hilt to make it happen, but greed drives it all on.

House prices rise for several reasons and some of them (developers' land banks a case in point) are certainly not a lazy spit away from corrupt. The essential problem is the belief that by buying a house you'll make a fortune tax-free. Knock that on the head and the problem's on its way to a solution.

Mark Wadsworth said...

L, exactly.

FT, good points. Back in the day (i.e. until about twenty years ago), it didn't matter if you got little from your parents or inherited little or nothing, university was free, houses were easily affordable, even in London etc etc. I guess a 20 or 30 year old would rather have a cheap house now and no student debt instead of a vague promise he might inherit half a house in a few decades.

Shiney said...

And lest we forget it wasn't DBCRs nasty Tories that REALLY stoked the fire - it was those lovely cuddly New Labour types, Blair, Mandy and Broon, that really got Home-Ownerism going.

Mark Wadsworth said...

Sh, a point many people have made many times, but the official narrative is that Blair Brown borrowed and spent too much. Even labour Phil's trot thus out. That's Indian bicycle marketing for you.

Mark Wadsworth said...

Phil's = pol's. Bloody auto correct.

Bayard said...

"B, to sum up, people hand over half their earnings in tax to preserve the inheritance if a small minority?"

Not really my point, that was that people no longer think they need to look after their parents in their old age, because that's what they've paid all that tax for, for the state to do it. Inheritance is just a side effect, although it has loomed much larger since the decline of social housing and the inflation of land values. Now nearly every elderly owner-occupier is sitting on a small fortune and there are a lot more of them, more than a small minority, anyway.

Mark Wadsworth said...

B, it's mainly London and the south east where houses cost a small fortune. So that's a quarter of all houses. Of those, half of all owners will spend it on care costs, or remortgage it and go on holidays. Leaves one-eighth. Most people have brothers and sisters, so won't get a "small fortune"
but a fraction of a "small fortune". Only a few will hit the jackpot and inherit a whole house.

I call that a small minority, you might think that is a large minority.

DBC Reed said...

@ft
You say the homeownership racket could have been nipped in the bud by a blast of Schedule A.But the actual chronology was: Tories (not yet the nazti party) get into a spot of bother with good-time girls and go for broke by abolishing Schedule A on domestic dwellings in 1963. In our house where my father is a local Tory politician, there is much laughter on the lines of "Brilliant but we'll never get away with it." Meanwhile I am doing a student job, and a supervisor talks to the bank manager (yes this is 1963) and is told "Invest in your own property; its bound to inflate outa sight!"
Property owning democracy is corrupt if it is based on first removing anti inflationary restraints.The Mad Woman followed this up by abolishing the Domestic Rates as well and trying to replace them with a Poll Tax.As she was being adored sadistically for visiting State violence on anybody like the miners who stuck to the old system of collective bargaining, she was creaming the votes while ruining the country, permanently it now appears. The old coal fields seem to correspond to the areas of high support for Leave: the we've nothing left to lose areas .(They did well to buy their pit cottages when they could ,didn't they? Now cannot move anywhere there's work.)
@Sh I appreciate that other parties have tried to appease the Homeownerists as well. In the Labour Party, if you question the One- Party Homeownerist State, you are accused of being a dangerous extremist attempting to tamper with perfection ( of electoral bribery without using your own money).The Homeownerist collaborators in the Labour Party fostered the idea that Brown borrowed too much money ,in order to get rid of him and his influence (which in fact stopped internationally the collapse in American property markets leading to a Thirties-style depression).

Bayard said...

B, it's mainly London and the south east where houses cost a small fortune.

It depends what you mean by "a small fortune". Let's face it, there are few places outside depressed former industrial areas where you can get a three-bed semi for under £100,000. I don't know about you, but I'd call even half that a small fortune. OK it's not much use for buying another house with, but if we put down the brochure and step away from the obsession with owning land for a minute, then £50K is still more than twice what an awful lot of people earn in a year.