Every year 40,000 British pensioners, most of whom have paid taxes for four decades or more, must sell their home to pay for their care. These people are not the very poor, and they are certainly not the very rich. They are exactly the sort of people who, whilst they cannot afford trust funds, have strived through their lives only to find their life savings disappear into the black hole of social care policy.
That is why the Government was right to attempt to transform the policy. Yesterday, it announced a “revolution” in funding for elderly care. The lifetime cost of nursing care will be capped, along with the annual fees charged for it. By removing the spectre of unlimited care costs, the government claims nobody in Britain will be forced to sell their home to make sure they are looked after in their old age.
But when something seems too good to be true it usually is. The Government’s plans for nursing care are undoubtedly well-intentioned, but they will cost a fortune to do half the job.
For starters, the £75,000 cap on nursing care is far too high. It is more than double the limit proposed by Andrew Dilnot, author of the most recent and comprehensive independent review on social care.
Of course the wealthy will have £75,000 of liquid assets. The poorest will benefit from state support from the outset so for them the cap is irrelevant. But what about everyone in the middle? For most people in this category, almost all their wealth will be tied up in their house. With such a high cap, I fear we will continue to see elderly people in need of care being forced to rack up debt or sell the family home.
There will also be a rise, from £23,250 to £123,000, in the value of assets people can have before they must contribute to the costs of nursing care. This is a step in the right direction, but does not go anywhere near far enough.
Last year, there was no British region where the average house price was lower than £123,000. In fact, the average UK house price is around twice that figure. In the whole South East region, where the average house price is now almost £300,000, the government’s new asset threshold is effectively meaningless. When I searched half a dozen estate agents’ websites for properties in Surrey worth less than £123,000, I found just two results, one of which was a dilapidated barn. Almost every homeowner in the region would face nursing care costs, up to £75,000. Those who fell ill would be forced back into debt at a time of life when they thought mortgages were behind them.
Even so, the government’s reforms will see increased public spending on nursing care for Britain’s pensioners. The government aims to cover the sizeable costs by freezing inheritance tax, a move that will raise around £1 billion and hit another five thousand people every year. Again, few of these will be the multimillionaires who will avoid the tax. They will be the strivers the government says it supports.
Of course the Government has to show how it will pay for its plans. However, breaking a clear manifesto commitment – not just for this Parliament, but the next – and trapping more ordinary families in a morally objectionable inheritance tax is the wrong way to go about it. Since when has it been a Conservative policy to oppose the right of parents to pass their property to their children?
Not under the current leadership, we were led to believe. Before the last election, and as long ago as 2007, the Conservative leadership promised to change the rules so that only millionaires paid inheritance tax . The reason, said David Cameron, was that the desire to pass on what we’ve earned to our children is the “most basic human instinct”.
Avoided by the richest and irrelevant to the poorest, the burden of inheritance tax falls firmly on the ordinary families in between. It should come as no surprise, therefore, that the idea of paying for nursing care by freezing inheritance tax first appeared in Labour’s 2010 election manifesto. It was dismissed in the last Conservative manifesto as “Labour’s plans for a compulsory death tax on everyone to pay for social care.”
So what should the government do?
Rather than borrowing ideas from Labour, Conservatives should remind themselves of the far better way of funding nursing care that was in our own manifesto. This proposed a voluntary system which would allow pensioners to protect their home by paying a one-off insurance premium of around £8,000.
The genius of this policy is that the premium would come at exactly the time when people have the money to meet the cost. Many people when they retire get a lump sum as part of their pension settlement, and would be happy to spend a small part of it to buy peace of mind for the duration of their retirement. What you do not see you do not miss. Many would consider it far better to pay £8,000 for certain security than to try and put aside, or try and find, £75,000 “just in case”. It is also the case that, for those who opt in, this policy would be largely self-funding.
The Government is right to tackle head on the issue of funding for nursing care. Indeed, its resolution is long overdue. It is a huge concern for millions of pensioners and people approaching retirement, and with an ageing population the problem will only become worse if we do not act.
However, whilst its aims are right, the government’s approach is simply inadequate. For pensioners to get the care they need and to keep their home, the £75,000 threshold must be lowered, and the original Tory insurance idea should be reinstated.
And so that a social reform does not become a political disaster, the government must ensure that pensioners in all parts of the country benefit from the reforms, even in the supposedly better off south. At the next election, Ed Miliband stands very little chance of gaining ground in the South East – unless we get measures that are so close to the heart of striving middle Britain so disastrously wrong.