Let's try an unthinkable tax

In a recent issue of Another Magazine, the very pro-free market American economist Irwin Stelzer reported a right-wing dinner-party, at which he argued for a 100 per cent inheritance tax (or, at least, a tax at near-confiscatory levels). Conservatives, he said, should support such a tax because it would ensure a level capitalist playing-field, allowing meritocracy to flourish and encouraging the young to work. Those who denounced welfare benefits because they sapped initiative and created dependency should recognise that these arguments applied with still greater force to the far more substantial sums acquired from inheritance.

It need hardly be said that there are left-wing versions of the Stelzer argument. That they are unlikely to be heard at Granita, the ICA or other left-wing meeting centres nowadays is a telling comment on what has happened to the British left. But the question of our attitude to inheritance is raised unavoidably by this week's report from the Royal Commission on Long-Term Care. The commission has tried to correct a typically British policy drift. Just as dentistry has slowly become a private service, just as the basic old-age pension has slowly become inadequate to support existence, just as state schooling has slowly become dependent on parental fund-raising and donation, so long-term nursing care has slowly moved into the private sector. In each of these cases, the transition occurred by stealth, without official announcement or debate. In the NHS, nursing care was free; in private establishments, it is means-tested. The result is that 60,000 old people a year have to sell their homes to meet their care costs.

So what, you may ask. If they are in care, they don't need homes to live in. But to many old people, it seems unfair that they should be forced to dispose of their assets and lifetime savings, rather than hand them down to their children. They do not see why they and their families should be penalised, just because they are stricken by acute illness. And this is where our attitude to inheritance becomes relevant. Since charges kick in where assets exceed £16,000 a year, and since one in four people eventually need long-term care, we already have what amounts to a severe inheritance tax but one that is levied arbitrarily, according to the accident of illness, its severity and its length. If the Stelzer tax, as it might be called, were introduced, the problem would be resolved. Either the means test could continue, since nobody could object to paying out money that would ultimately go to the state in any case. Or all nursing care could be provided free, using the substantial sums raised from the new tax. In particular, the Stelzer tax would meet the biggest objection to the present system: that while the poor pay nothing and the rich can afford the charges, those in the middle (aspirational, home-owning, electorally floating) lose everything. Under Stelzer, everybody loses, except the very poorest.

All this seems unthinkable, though Mr Stelzer has been sighted at 11 Downing Street seminars and we should remember that the same could once have been said of water privatisation. But if ministers could manage even a fraction of Mr Stelzer's ideological clarity they might find it easier to choose between the alternatives presented by the royal commission. The majority favoured changing the present system so that personal care (washing and bathing as well as nursing) becomes free to everybody while the minority favoured providing only nursing care free. Several questions emerge. Does the left favour inheritance wholeheartedly, not at all or just in smallish amounts? Should the welfare state concentrate on helping the poorest (targeting) or should it, for the sake of social solidarity, offer free services to all (universalism)? Does the left think that more of the aged and infirm should be looked after by their own relatives? How far should a sense of equity come into it? For example, many would argue, as did the majority on the royal commission, that it is unfair to spend so much more on cancer and heart patients than on Alzheimer's and Parkinson's patients simply because the latter are not usually regarded as suitable for long-term hospital treatment. Should we revive the insurance principle so that we regard people as entitled to care because they have paid for it and, as in any private scheme, disregard their means? If so, should we introduce compulsory insurance for the costs of elderly care? All Frank Dobson, the Health Secretary, could find to say was that he thoroughly agreed with the commission that "this is a complex issue and there are no easy solutions". And it is indeed hard to see how new Labour or the Third Way could answer these questions. Oh for the ideological certainties of an Irwin Stelzer!

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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.