New death tax for all shock

The levy would be charged on all estates up to the current inheritance tax threshold of £325,000.

Any amount above the existing threshold is already taxed at 40 per cent. But the extra charge would add a huge £32,500 on top of the tax bill for such properties.

It means people with an estate valued at £500,000 would find their relatives hit with a bill of £102,500 after their death.

Health Secretary Andy Burnham raised the spectre of the additional levy at a debate on social care funding yesterday.

He said: “This is not a flat fee and would enable people to protect 90 per cent of their homes and savings.”

Mr Burnham also claimed that the levy would be “progressive” since the millionaire would pay more than the ordinary pensioner.

He said an earlier idea to charge a flat rate on people’s estates once they die – thought to be around £20,000 – was still being considered.

But critics last night accused the Government of treating people “like fools”.

Shadow Health Secretary Andrew Lansley said: “Everyone knows that Labour wants to impose a death tax on

grieving families but yet again Andy Burnham refuses to be straight with the British people about his plans.

“It is incredible that the Government is set to publish a White Paper outlining their death tax policy within the next three weeks and yet the Health Secretary claims he is still weighing up various options. He is treating people like fools.”

The issue of how to fund care for the elderly has risen to the top of the political agenda in recognition that Britain’s elderly population is steadily rising. By 2026 one in five people will be 65 or over and spending on care services could top £25billion.

As many as 45,000 people a year are now forced to sell their homes to pay for nursing home care and a much-anticipated White Paper on the future of social care funding is to be published later this month.

But yesterday Mr Burnham set out what a “compulsory” model of public funding could look like at the debate hosted by merged charities Age Concern and Help the Aged.

The model, believed to be favoured by ministers, would involve every adult in England paying towards the cost of a new National Care Service, a universal system to provide free services to the elderly at the point of need, much like the NHS.

Mr Burnham denied that a single amount would be charged to everyone under a compulsory system.

He insisted several options were still being considered, including the 10 per cent levy on the value of a person’s estate, or paying a means-tested amount in instalments over the course of retirement.

However, hopes of reaching a cross-party deal are low after weeks of bad blood between the parties and the collapse of consensus talks.

Campaigners estimate that the social care budget needs to increase by £370million a year just to keep pace with the rising costs of caring for an ageing population.

Jenny Owen, president of the Association of Directors of Adult Social Services, said: “Whoever wins the Election will be faced with reforming the system and that is why we need common ground.”

A Department of Health spokesperson said of the 10 per cent levy: “It’s well known that this is something that is on the table, along with many other options, but, as the Secretary of State made clear, we have not made any decisions yet.”