Free social care is a fine promise, but it won’t be free.
The new prime minister Andy Burnham has now conceded there may be a “shortfall” in his plan for a national care service. Strip away the politics and the arithmetic is brutal. The service is expected to cost £18bn a year.
The adjustment to the triple lock doesn’t begin until 2030, and the savings it generates build slowly over decades. Borrowing has already been ruled out by the ‘King of the North-turned-PM.
Take borrowing off the table, accept the pension savings are thin, and only one lever remains. Tax.
Even the former head of the Institute for Fiscal Studies, who supports the pension reform itself, calls the idea that it will pay for free care any time soon “for the birds”. He’s right.
Run both scenarios and they end in the same place. If the new double lock saves less than hoped, the funding gap widens and tax fills it. If it saves more, a care system on the scale of the NHS still costs far more than any pension tweak can cover, and tax fills the rest. Every route leads to the Treasury asking for more.
So, where does it come from?
Labour’s 2024 manifesto pledge not to raise personal tax rates still boxes the government in. The case for raising one of the main taxes looks set to wait until closer to the next election. Governments in this position have a well-worn playbook. When the big rates are politically untouchable, everything around them becomes fair game.
Frozen thresholds quietly drag more earners into higher bands. Capital gains, dividends, inheritance tax, pension tax relief and property all come under the microscope. Wealth gets taxed when income can’t be, because it’s politically easier.
Anyone whose financial life is concentrated in the UK is squarely in the firing line. Property, UK-listed shares, sterling cash and UK pensions are all exposed to the same government, the same currency and the same fiscal squeeze.
There’s also a cost to the uncertainty itself. A tax debate deferred until the run-up to an election means years of speculation about which allowances get cut, which reliefs get scrapped and which rates get raised.
Those who wait for clarity tend to end up acting in a hurry, with fewer options and worse terms. Preparation is the obvious response, and it needs to start now.
Allowances and reliefs available today won’t necessarily exist in their current form tomorrow. Families should be reviewing how and where their assets are held, how exposed they are to a single tax regime, and how heavily their wealth leans on sterling. International options deserve a serious place in that conversation. Diversifying across jurisdictions and currencies reduces dependence on one government’s fiscal choices.
For people with international careers, family overseas, or perhaps plans to retire abroad, cross-border pension and investment arrangements can be far better suited to their lives than a purely domestic set-up.
Regulated international structures are entirely legitimate and used widely by globally minded families who want flexibility as rules shift. None of this is about dodging a fair contribution. It’s about recognising which way the fiscal wind is blowing and refusing to stand still while it does.
Britain’s demographics make a better care system necessary. Few would argue otherwise. But a promise of free care, a pension reform that delivers modest savings late, and a refusal to borrow add up to one conclusion.
The bill will be paid through tax, and much of it will land on accumulated wealth. Those who act early can protect what they’ve built and keep it growing. Those who wait for the government to spell out the details will find the details have been written with them in mind.
The care service may still be years away. The tax rises to fund it are already on their way.
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