Pensioners who continue to work face paying national insurance to help fund the NHS

The Resolution Foundation Intergenerational Commission has said that pensioners who continue to work should pay national insurance to fund a 2.3 billion windfall for the NHS.
The Resolution Foundation Intergenerational Commission has said that pensioners who continue to work should pay national insurance to fund a 2.3 billion windfall for the NHS.

Pensioners who continue to work should pay national insurance to fund a £2.3 billion windfall for the NHS, an influential commission has recommended.

Straining social care services should receive the same amount but funded through a property tax, according to the group of peers, business leaders and policy experts.

Inheritance tax should be abolished and replaced with a lifetime limit for recipients of £125,000 before levies kick in and the money raised would fund a £10,000 payment for 25-year-olds to help them get on the property ladder, pay for education, set up a business and invest in pensions, the Resolution Foundation Intergenerational Commission said.

Executive chairman Lord Willetts, a Conservative former minister, admitted the recommendations in the report were "not easy or comfortable" but said many no longer believe Britain's young and old are being treated fairly.

He said: "Britain's contract between generations lies at the heart of society. As families we provide for our children and parents at different times. We expect the state to support these natural instincts - but too often it is tilted in the opposite direction.

"Many people no longer believe that Britain is delivering on its obligations to young and old. But our commission shows how Britain can rise to this challenge.

"From an NHS levy to put healthcare on a firmer financial footing, to building more homes and a Citizen's Inheritance to boost young people's career and housing aspirations, our report shows how a new contract between generations can build a better and more unified Britain."

The commission, which was chaired by the peer alongside Frances O'Grady, TUC general secretary, and Carolyn Fairbairn, CBI director-general, called for an "NHS levy" funded by national insurance on the earnings of workers over the state pension age as well as on some occupational pension income.

It comes after reports that Health Secretary Jeremy Hunt is considering putting forward proposals echoing the recommendation, a measure that would be "deeply unfair", according to a Tory former pensions minister.

Council tax should be abolished and a property tax introduced in its place that would include surcharges on second and empty homes but stamp duty would be halved to encourage people to move, under the report's plan.

Instead of inheritance tax, benefactors would have a £125,000 lifetime allowance, with anything above that taxed at 20% up to £500,000 and 30% after that. The commission estimated that despite lower rates, the move would raise an extra £5 billion initially by curbing avoidance.

Ms Fairbairn said: "The idea that each generation should have a better life than the previous one is central to the pursuit of economic growth. The fact that it has broken down for young people should therefore concern us all.

"We need individuals, businesses and the state to pull together to address this challenge, and lift the living standards of young and future generations."

The commission also makes a series of other recommendations, including improving employment security, a £1 billion "better jobs deal" to help struggling young people get into work and bolstered rights for renters.

It found millennials, people born between 1981 and 2000, are earning the same as those born 15 years before them were at the same age and are only half as likely to own their home by age 30 as baby boomers, born between 1946 and 1965, were.

Ms O'Grady said: "Today's young workers shoulder huge risks. They're bearing the brunt of the rise in insecure work. And many have little prospect of a decent home or a decent pension.

"To fix these problems we need an economy that works for all people - millennials and baby boomers alike. That means building more houses, giving everyone a decent retirement, and crucially stronger unions and rights at work."

Baroness Altmann, Tory former pensions minister, warned Theresa May that the national insurance recommendations would be as unpopular with voters as the abandoned election plans for a so-called dementia tax.

She said: "Only about one in 10 pensioners continues working past state pension age and are not all well-off. Many older workers keep working because they do not have good pensions and are trying to make ends meet.

"It is wrong to see them as an answer to the care funding shortfall. Why should they be targeted to pay for other people's care while non-working pensioners, many of whom have generous, often taxpayer-funded, pensions would pay nothing?

"I hope the Prime Minister will heed the lessons of the last election manifesto, which proved how politically toxic the issue of care funding can be. The aim should be to share the burden of care funding, not single out one group to find funding for everyone else."