© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
February 10, 2013 6:20 pm
A £1bn-a-year plan that will set a lifetime limit on the sums elderly people must pay for care risks backfiring after campaign groups warned substantial numbers would still be forced to sell their homes.
Under the plan, the state will step in if an individual’s costs exceed £75,000. About a fifth of the plan will be funded by extending the freeze on the inheritance tax threshold, which stands at £325,000 or £650,000 for couples, by three years from 2015-16.
The proposed cap – currently exceeded by almost one in five older people – excludes “hotel” costs such as food and accommodation but a separate annual ceiling, under which the state will pay if those costs go above about £12,000 a year, will be announced by Mr Hunt on Monday.
Mr Hunt said on Sunday that “what we’re trying to do is to be one of the first countries in the world which creates a system where people don’t end up having to sell their house”. He hoped that insurance companies and pension schemes would step in to provide cover for any costs up to £75,000. “I don’t want anyone to pay anything at all,” he said.
However, Stephen Burke, director of United for All Ages, which campaigns on inter-generational issues, argued that many older people and their families would still have to sell their homes to pay care home bills – “whether it’s in their lifetime or after the older person has died”.
A government-appointed commission led by the economist Andrew Dilnot had recommended a cap set at between £35,000 and £50,000. However, Mr Dilnot is expected broadly to back the changes, which are being introduced in a harsher economic climate than when his commission began work more than two years ago.
Officials pointed out on Sunday that the £75,000 cap had been set at 2017 prices and would be little over £60,000 at the 2010/11 prices used by Mr Dilnot’s commission. The new £123,000 asset threshold also represents an inflation-uprated equivalent of the £100,000 ceiling he recommended in his 2011 report.
The announcement on Monday will be presented as proof that the coalition is still able to take tough decisions, even as Tories and Liberal Democrats prepare to do battle in this month’s Eastleigh by-election.
The cost of the plan, which will also raise the asset threshold up to which people can claim means-tested help from £23,250 to £123,000, will be largely met from money released by the introduction of a flat rate state pension, which will end the system under which people who have contracted out of the state second pension can claim relief on their national insurance contributions.
That will deliver an estimated £6bn a year windfall to the Treasury when the plan comes in, expected to be 2017, the same year that the care changes will take effect.
The Liberal Democrats are understood to have pressed hard for wealthier people to bear some of the pain through an extension of inheritance tax. The policy could, however, revive suggestions that a “death tax” is helping to fund the social care reforms and is a reminder that the chancellor has failed to carry out his dramatic announcement in 2007 that he would raise the inheritance tax threshold to £1m.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in