A voter’s burden

(featured image: carnagenyc)

Voting, like so many things in life, is about the difficult task of weighing up many, often conflicting options. Maybe a (behavioural) economics perspective can help cut through it?

On 18 April, Prime Minister Theresa May called a snap election in the UK for 8 June. On the face of it, she is after an enhanced parliamentary majority to give her “a strong hand” in the Brexit negotiations  and deliver the “best possible deal for Britain”. But even though Brexit dominates much of political life, there are other domains in politics that are pushed by the various parties. The ruling Conservative party did come up with a proposal to cap energy prices (see The anti-nudge), and their manifesto also contained a surprising plan for funding long-term adult social care.

The idea itself is rather simple. At present, if you need social care at home, you need to pay for it yourself until you have less than £23,250 left, excluding the value of your home. The proposal is to raise that threshold to £100,000, but to also include the value of the home (which may then need to be sold after your death to settle the balance). Initially, the proposal stipulated that, other than the £100k floor, there would be no limit on the total amount paid by the patient.

That would have been bad news for anyone owning even a modest home, and so there was a hurried correction to the proposal to cap the total amount payable (to a so far unspecified level). But even this amended version implies a considerable shift of the adult social care cost from the state to the (well-off) individual. Naturally, the opposition parties, well, oppose the idea, and would pretty much maintain the status quo, continuing to fund adult social care largely out of general tax and national insurance revenue.

This binary choice relating to a single policy domain, between more and less individual contribution to the cost of care, conceals a remarkable complexity, though. Choosing – and hence voting – is a daunting task. How to approach this challenge?

A material world

Let’s start looking at the trade-offs involved at the unequivocally rational end of the spectrum, and consider the material costs and benefits. Would the Conservatives’ proposal leave you richer or poorer? That looks straightforward enough. Sure, it depends a lot on whether you own your home, and if so, how much it is worth, but that can all be worked out.

Financial Times journalist Chris Giles calculated what percentage of your wealth would be eaten up if the total care costs before you finally died were £150,000, as shown in the graph below. And there were several more attempts to determine more specifically under what circumstances you’d gain or lose.

socialcaretaxrate2

What will be left of my fortune? (source: Chris Giles)

All that is on the assumption that you will need the kind of care in question, of course. If you die without needing long-term care, it doesn’t matter how much you’d have had to pay: you can leave your estate to your heirs intact. But the state is carrying an ever increasing cost burden for long-term care, you are likely to pay for it anyway while you are still alive through higher taxes.

 

With the uncertainty around what you will and won’t need when you’re old and decrepit, it looks as if establishing a clear-cut cost-benefit case is not that easy.

Belief and conviction

Might strong ideological convictions help us be more decisive? If you believe that it is a sacred right to leave your fortune to your children, then you should clearly not support the Conservative manifesto proposal. If you believe that inequality is a growing problem, and that one of the forces that sustain is in inheritance, then the proposed measure is for you. If you hold both beliefs, though, you’re still no further towards a decision.

Maybe you have been a working class Labour voter or a middle class Conservative voter all your life, convinced that your preferred party serves your class the best. But here are the Tories, proposing to take money away from the middle class, and Labour rejecting a measure that would free up billions in the social care budget by making the well-off pay more. That doesn’t help either.

Context matters

When people’s preferences are weak, or ill-defined, they are often influenced by the so-called choice architecture – the context that surrounds the situation in which you have to decide. But the context varies dramatically depending on who you listen to.

Is it a quadrupling of the amount you can keep, from £23,250 to £100,000? Or is it a dementia tax, that will force people to sell their home, reclaiming much of the one bit of wealth that people of otherwise modest means can pass on to their children? Is it a regressive measure or a progressive measure?

Is it fair because it makes people contribute according to their means, especially those lucky enough to have profited from the astronomical increase in property values? (An average house in the UK costing about £12,000 in 1976, was worth more than £200,000 forty years on, an increase by a factor 16. In London house prices grew by a factor 32 over that period.) Or is it unfair because it only affects those unlucky enough to be affected by a terrible long-term condition like dementia?

mayfrontpages

Principles or pragmatism?

Even the hasty amendment of the manifesto proposal can be framed in two ways. Was it Mrs May’s umpteenth “U-turn”, showing what an unprincipled politician she is? Or was it a sign of pragmatism – changing your minds when the facts change (as the great economist Keynes never said – it was Paul Samuelson)?

 

An impossible challenge

And this is of course a matter of just one policy. Let’s imagine that you managed to weigh up all these elements and come to a conclusion. But now let’s say that you are feeling very strongly about Brexit. If you’re against the Conservative social care proposal, but you want to give Theresa May the strong hand she’s asking for, what do you do? Or if you think it is a good idea to let well-off people pay for their social care, but you want to give Mrs May a strong parliamentary opposition (or even, hoping for a miracle, stop her gaining an overall majority), what do you do?

Reflecting on all this, I should probably count myself lucky: being a foreigner, I don’t get to vote. But I will spare a thought for the poor British voter, and I sympathize with those who, having thoroughly thought everything through, decide to abstain. Some challenges are just impossible.

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About koenfucius

Wisdom or koenfusion? Maybe the difference is not that big.
This entry was posted in Behavioural economics, Cognitive biases and fallacies, politics and tagged , , . Bookmark the permalink.

One Response to A voter’s burden

  1. thepolicysketchbook says:

    The implications of the policy are a bit more complicated that this, for a few reasons. First, the value of someone’s house is already included if they go into a care home, so even under the manifesto proposals many people who need residential care are better off – although as you note, homeowners who need care at home are much worse off. It’s not clear whether the state will end up spending more or less than it does now – i.e. it is not clear that the policy “implies a considerable shift of the adult social care cost from the state to the (well-off) individual”. Once you add a cap on costs, that is almost certainly not true. Public spending will probably be higher, so in sum there will be a shift from individual to state, but some individuals will do worse and some better.

    The other complication is that the Dilnot proposals include an extension of means-testing as well as a cap on costs. This means that Chris’ chart is right for the current system and Tory proposals, but doesn’t quite get the Dilnot system right.

    For more details, see my blog:
    https://policysketchbook.wordpress.com/2017/05/22/the-conservative-manifesto-social-care-and-taxing-inheritance/

    All of this is of course complicated, and most reporting on the issue hasn’t really helped voters to understand what the implications are for them. This only adds more weight to your argument about the predicament of a policy-driven voter: not only must they weigh up various issues of principle across a range of policies, they must do so without access to the information they need to understand the policies. Hardly a wonder then that so many voters seem not to be driven entirely by policy choices.

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