Sir Steve Webb proposes 1p tax levy on over-40s to fund care discounts
Former pensions minister Sir Steve Webb has proposed an automatically applied 1p income tax levy for people over 40 to help fund social care. The plan would let people opt out and offer a discount on their care costs, aiming to raise money for urgent needs ahead of a proposed National Care Service.
The levy would apply to basic rate earnings between £12,570 and £50,270, capping the annual charge at just under £380. Contributors would receive a 4 per cent discount on care costs for each year they paid in, with 25 years of contributions covering those costs in full. Webb estimates the scheme could raise more than £3 billion a year, while scrapping the pension triple lock is projected to save £15 billion annually by 2040 and £50 billion by 2050, though savings would be limited at first.
- A proposed 1p levy could raise more than £3 billion a year for social care.
- People over 40 could opt out and earn discounts on care costs.
- Andy Burnham has not set out when or how a National Care Service would be funded.
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Social care means support with daily living – washing, dressing, meals – provided to many older and disabled people. Funding social care has become increasingly pressing as the population ages and demand grows, prompting politicians to propose various solutions.
Sir Steve Webb, a former pensions minister, has suggested a new way to help pay for it: a 1p income tax levy automatically applied to people aged over 40, which they can opt out of. Those who contribute would receive discounts on their social care costs, with the scheme intended to raise billions of pounds annually.
Webb's proposal comes as the government works on establishing a new National Care Service, and reflects wider debate about how to fund care sustainably in coming decades.
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The strongest fair case each way — we don't pick a winner.
The case for
The proposal addresses an urgent social care funding crisis through a modest, transparent mechanism that directly links contributions to benefits. The 1p levy on basic rate earnings is a relatively small burden compared to the magnitude of care needs, and the opt-out structure respects individual choice whilst building a sustainable fund that could raise over £3 billion annually. By tying contributions to care discounts, those who pay in gain concrete value, whilst the scheme avoids further burdening young people or creating unfunded liabilities for future generations.
The case against
Even a 1p levy constitutes another tax on working people already facing multiple calls on their income, and the opt-out mechanism may effectively pressure those uncomfortable with active opt-out into participation. The scheme's benefits are weakest for those most in need—those unable to afford care will struggle to benefit even from the discount—whilst the £3 billion raised may prove insufficient for the scale of the social care crisis. Adding complexity to the tax code when broader reforms are needed, the levy risks being a band-aid on a systemic problem that demands more comprehensive, progressive solutions funded through reformed general taxation rather than a new ringfenced levy.
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Originally published by Daily Mail as “How a penny on over-40s’ tax could pay for new social care service”.