11 Feb 2013

Social care costs to be capped at £75,000

The government announces plans to cap the amount the elderly have to pay for social care in England at £75,000 – after which the state will step in to help.

Health Secretary Jeremy Hunt told MPs: “The intention is not that people should have to pay up to £75,000 for their care costs, but to create certainty that this is the maximum they will have to pay.”

The new cap, to be put in place by April 2017, is more than double the £35,000 recommended by the independent Dilnot Commission.

Mr Hunt said: “The point of what we are doing is to protect people’s inheritance. The worst thing that can happen is at the most vulnerable moment in your life you lose the thing you worked hard for, that you saved for, your own house.

About as credible as a Findus Lasagne. The National Pensioners Convention comments on the plans

“And what we are trying to do is to be one of the first countries in the world which creates a system where people don’t have to sell their own house.”

Mr Hunt also said it was “desperately unfair” that anyone with assets of more than £23,250 did not receive state help with care costs. He claimed that this threshold currently forces 30,000 people a year to sell their homes in order to meet care costs.

Currently set at £23,250, the threshold will therefore rise to £123,000 by 2017, he said, beneath which people will be able to receive means-tested support to meet care bills.

Mr Hunt said the new cap would be a “fully funded solution” that would pave the way for insurers to provide a system of cover for elderly care. He expects the new rules to cost the government £1 billion by the end of the next parliament – a cost that will be met by freezing the inheritance tax threshold (IHT) for another three years, and by taking money from public and private sector National Insurance (NI) contributions.

Thousands more people will be hit with inheritance tax bills as a result of the extended freeze on the £325,000 IHT threshold – £650,000 for couples – after which estates are taxed at 40 per cent.

Cap ‘higher’ than recommended

Andrew Dilnot, author of the report published in 2011, said that his original recommendations were based on 2010/11 prices – whereas the £75,000 is based on 2017 prices. The latter is the equivalent of £61,000 today, he said, adding: “So it’s higher than we would have wanted – £11,000 higher to top end of our range (£35,000-£50,000) and I regret that but I recognise that the public finances are in a pretty tricky state”.

Mr Dilnot said care costs should be “bound up” in the way people plan for old age. He added: “I think in the longer run our pension could also be adjusted so that if we need care our pension increases very substantially and that I think is the biggest way in which the financial services sector will get involved.”

He said: “At the moment many people find themselves hoarding their quite meagre wealth because they are so worried about the worst case. One of my big hopes for this system is that there will be lower inheritances in future because people, knowing what the worst case is, will now be able to start spending their money on their own lives rather than keeping it just in case they need lots of care.”

‘Tinkering at the edges’

Shadow health secretary Andy Burnham welcomed “elements” of the plan, including the cap and raising the means-test threshold. However, Mr Burnham said: “This is a step forward…but a faltering one…vulnerable people will still face rising care charges, homes will be lost”.

Mr Burham also pointed out that the measure do not take into account the cost of accommodation or rising council charge. “IT’s more likely they’ll have to pay right up to £75,000,” he said, adding that the problem needed a “far bigger and bolder response”.

The National Pensioners Convention (NPC) described the social care reforms as “about as credible as a Findus Lasagne”.

NPC general secretary Dot Gibson said: “The social care system needs urgent and radical reform, but these proposals simply tinker at the edges.

“The current system is dogged by means-testing, a postcode lottery of charges, a rationing of services and poor standards and nothing in the plan looks like it will address any of these concerns.

“Setting a lifetime cap on care costs of £75,000 will help just 10 per cent of those needing care, whilst the majority will be left to struggle on with a third rate service. Using inheritance tax or money saved from the state pension system simply won’t raise enough money to bring about the change that’s needed.”

Shadow care and older people’s minister Liz Kendall said a “bigger and bolder response” was needed.

“This would be a small step forward for some people who need residential care in five or more years time,” she said.

“But it won’t be fair for people with modest homes. Andrew Dilnot recommended a cap on care costs of £35,000 and warned that anything above £50,000 won’t provide adequate protection for people with low incomes and low wealth.

“And these proposals won’t do anything for the hundreds of thousands of elderly and disabled people who are facing a desperate daily struggle to get the care and support they need right now.”

Potential ‘step forward’

However, the Association of British Insurers (ABI) said the reforms were a potential “step forward”.

Stephen Gay, the ABI’s director of life, savings and protection, said: “This is potentially another positive step forward in tackling the challenges of an ageing society. The cap and the higher means test give people greater certainty and will enable them to plan ahead for later life.”

Town halls said the cap was a “positive step” but not enough on its own.

David Rogers, chairman of the Local Government Association’s community wellbeing board, said: “A cap will help create more certainty, fairness and, in the process, peace of mind.

The cap and the higher means test give people greater certainty and will enable them to plan ahead for later life. Stephen Gay, ABI

“We need a system that helps families with the cost of care in old age and protects them from the heartache of losing their homes to pay for it.

“We also need a system that encourages people to plan ahead, both financially and through healthy living to help prevent the need for care.

Mr Rogers added: “On its own a cap is not enough to sort out long-term care and will mean little if the starting point is a system that is massively underfunded and unable to cope with the pressures of our rapidly ageing population.”

The decision to set the cap at £75,000 comes despite extensive briefings to newspapers last August that David Cameron and Nick Clegg had agreed they would implement the Dilnot recommendations in full – including the proposed £35,000 cap.