Theresa May

Playing Tax Collector for the Welfare State Didn't Win British Tories Voters

The party is in trouble because of Prime Minister Theresa May's dementia tax


Plenty of people love government welfare when it seems like someone else will pay for their benefits. The problem with that, as Margaret Thatcher famously

Theresa May
Prime Minister's Office via

pointed out, is that eventually you run out of other people's money. And when that happens, the state goes after your money – because a government that is powerful enough to give you everything you want is also powerful enough to take away everything you've got.

That logic is now playing out in England where, Thatcher's own Tory Party, having abandoned its commitment to rolling back the welfare state, tried to double down on taking away "your" money when Prime Minister Theresa May recently proposed what has been widely pilloried as a "dementia tax" to pay for the long-term care of the elderly. Her call became so unpopular that her party, which was many points ahead a few weeks ago before she called for the tax, is poised to lose seats today in the snap elections that May called. And May herself has lost her 20-point edge and is locked in a dead heat with the Labor Party leader, Jeremy Corbyn, an unreformed Marxist who thinks money grows on trees.

Consider this background about Britian's long-term care system that the Brits call "social care":

As things stand, anyone who gets terminal cancer or heart disease can get long-term free care through the National Health Service — Britain's chronically underfunded government-run universal health-care system — because they can stay in the hospital. However, the NHS bolts when it comes to chronic mental conditions that don't require hospitalization. To get help for those, the elderly have to turn to their local councils (municipal governments). However, these councils depend on London's central government for funding, and that body has been cutting back (partially to offset NHS's ever-ballooning costs). So they refuse to pay for in-home care of the old and senile if these seniors have anything over $30,000 in savings, not counting their homes.

This leaves many older Britons, some dealing with serious conditions such as Alzheimer's, in the lurch, a problem that will only get worse as Britain's population ages. (In the next 16 years, the country's 65-plus senior population is expected to grow by 40 percent.) May's Tory predecessor, David Cameron, had pledged to cap the lifelong out-of-pocket long-term care costs of such elderly at around $93,000 by 2020.

But it's fiscally unsustainable for the government to pick up the remaining tab. So May initially proposed to scrap that cap – only to beat a quick retreat after a maelstrom of protest that threatened to plunge her party into crisis. But she didn't withdraw the other part of her proposal, which is why she is in trouble today. She told seniors that they'd be allowed to keep up to $128,000 of their savings before state assistance kicks in — up from $30,000. The catch is that their home values would be counted in those savings.

May assured seniors that she won't make them sell their homes to pay for their care so long as they were living in them. Instead, her plan was to recover the state's costs from the sale of their house after they (and their spouse) died.

At first blush, this may not seem like a bad deal: The elderly get to keep more of their savings and live in their homes while taxpayers ultimately get paid back. But if the elderly are going to have to pay for their care anyway, what is the point of government welfare in the first place? Isn't a safety net supposed to protect you from catastrophic events that wipe you out financially?

Conservatives have long lampooned liberal plans to impose "death taxes" on the estates of rich people. Yet here they are proposing "dementia taxes" on practically every homeowner. And conservative "dementia taxes" may arguably require even more intrusive government than liberal "death taxes."

For starters, the elderly who turn to the state for their care (and pretty much everyone but the wealthiest will have to because as the government expands its role in the long-term care sector, England's already small private insurance market will inevitably shrink more) could well lose say in how their property is disposed after their death. Their children could supposedly try and scrape up enough funds to pay off the government, but how many will be able to do so?

Furthermore, what the government is owed will be determined … by the government itself. If it offers inflated estimates of how much long-term care costs, who's to stop it?

It is hardly a stretch to suggest that over time the government won't confine its recovery efforts to what it has paid in any individual's case. Once the notion that it is okay for the government to go after private homes to pay for its services becomes acceptable, what's to prevent it from arguing that the relatively better off and healthier should be required to cough up some of their home equity for the less wealthy and sicker? Is it so unfathomable that liberals will make this argument in the name of equality and Tories in the name of fiscal responsibility?

England's welfare state has grown to a point where it is no longer possible to obfuscate the basic existential dilemma that it poses, namely, that there is no such thing as "free" universal coverage for anything: Either individuals take charge and make provisions for their own care, and maintain control over their funds — or hand them over to the government, and lose control. The first requires rolling back the welfare state, the latter expanding the tax collection state.

There is no third way, at least not one that is sustainable over the long run. It's a pity that after Thatcher there is no party — or political figure — left in England to point out the inevitable.

A version of this column originally appeared in The Week