How a penny on over-40s' tax could pay for new social care service

All over-40s could be asked to pay an extra 1p of income tax under proposals to fund social care.

Andy Burnham has vowed to launch an NHS-style National Care Service, funded partly by scrapping the pension triple lock. Under proposals from former pensions minister Sir Steve Webb, additional funding could be raised by levying a 'voluntary' 1p levy on the income of all older people.

The idea would be modelled on pensions auto-enrolment, where the levy is automatically charged unless people opt out.

In return for contributing, people would receive a 4 per cent discount on their care costs for each year they have paid in. Those who contribute for 25 years would have social care costs funded for free.

The Department for Work and Pensions has said ending the pension triple lock in 2030 could save £15billion a year by 2040, rising to £50billion by 2050. But it is likely to generate only small savings in the early years of the next decade – and could save nothing at all.

In a new policy paper by pensions experts LCP, Sir Steve said that a voluntary 1p levy could raise more than £3billion a year immediately, even if significant numbers opt out.

The charge would be levied on all over-40s paying income tax, including better off pensioners. But it would only be paid on basic rate earnings of between £12,570 and £50,270, so effectively capped at just under £380 a year.

Sir Steve said there was a strong case for adopting the 'hugely successful' auto-enrolment model, which has led to a surge in the number of people paying into a pension.

He added: 'This scheme, with an opt out for those who don't want it, provides an affordable and efficient way for people to protect their savings.

'We have already had a very warm response to these ideas as we have discussed them, and hope that they might form a useful approach for consideration as part of all-party discussions.'

The report suggests the plan could raise immediate funds to ease some of the most acute social care problems ahead of the creation of a National Care Service. Mr Burnham has yet to spell out exactly how the new service will be funded – or when it will start.