The Tories are right to attempt to address the growing care crisis, but their proposals would actually make it worse. Incentives are needed to encourage people to fund their own care says Baroness Ros Altmann
The Tory Manifesto was a turning point in the election campaign. To say the policy announcements on pensions and care were badly thought through would be an understatement. They don’t really seem to have been thought through at all.
The combination of means-testing Winter Fuel Payments for pensioners, with the draconian social care changes, suddenly saw the Tories’ traditional support among older voters waver.
Mass means-testing of pensioners has already been discredited due to the disincentives it poses to private pension saving. To suggest that the cost of social care could be met by means-testing Winter Fuel Payments is fantasy. And almost immediately, the Scottish Tories announced that all pensioners in Scotland would still get the money.
The care crisis has been worsening for years and is in danger of bankrupting the NHS. The Tories are right to say this crisis must be addressed. Clearly, more funding is needed urgently, and the burden will fall on younger generations unless radical reforms are introduced. There is no one silver bullet that will solve this massive problem, but some elements of the solution were already in place. The Manifesto tore those down, rather than building on them.
Legislation was passed in 2014, with cross-party consensus, for a £72,000 cap on lifetime spending on ‘eligible care needs’ for home care or care home costs. This did not include the costs of board and lodging, which would be up to an extra £12,000 a year.
The legislation also increased the means-test threshold from £23,250 up to £118,000 of savings. At the moment, if you have more than £23,250 of savings or assets, you fund all of your own social care. Crucially, though, the value of your home was not taken into account in the means-test if you received home care or if you were in a care home but still had a relative living in your house. Then along comes the Tory Manifesto and proposes something altogether more draconian – suddenly opening up the social care funding crisis as a national political issue.
Instead of a £118,000 means-test floor, the Tories cut this to £100,000.
And this was to include the value of your home in all circumstances. So if you needed homecare, or you were in a care home and still had a partner living in your house, the value of your property would still count against you for council funding. Suddenly, millions more people would be hit by social care costs – most particularly those families whose loved ones had dementia or other conditions that did not count as ‘health’ needs. A millionaire with cancer could have all their care costs paid by the NHS and their house was safe. But an older person with dementia, and a home worth £250,000, would have to pay for all their care until most of their house value was gone.
There are so many reasons why the Tory Manifesto Care reforms were disastrous, not only because they were politically poisonous, but they would also actually make the care crisis worse. Here are some of the major flaws in the proposals.
They would actually worsen NHS bed-blocking. Effectively, older people who owned their own home would have to pay for leaving hospital. Current bed-blocking often happens when older people stay in hospital until homecare is arranged for them. But if they know the costs will come out of their house as soon as they leave hospital, they and their children will have an incentive to stay in hospital for longer where care is free.
The proposals don’t give councils any extra funding to pay for car. The lack of social care funding, either at state or private sector level, is at the heart of this crisis. No money has been set aside by local authorities, or individual families, to cover elderly care costs. Councils will still need the funding to pay for elderly care and will not know when they will recoup the outlay from people’s homes. Repayment will depend on how long the person lives, and may also involve legal costs to enforce payment from an estate. This leaves current underfunding unaddressed and fails to help councils plan for long-term care.
The Tories’ plans would disincentivise saving for care instead of incentivising it. A sensible social care funding policy would ideally encourage people to save to fund their care, similarly to incentives to save for an old age pension. But these proposals will discourage people from bothering to save for care costs as they will lose so much in the means-test.
They would also increase strain on NHS. Older people may try to do without the help they require in order to avoid having to borrow against their house. More may then end up in hospital after struggling to manage without the care they need.
The proposals would also probably increase the numbers of elderly people needing state support: The proposals would increase incentives for people to give their assets away earlier. Many may decide not to bother paying off their mortgages, or sell their home and give money to their children, or move into rented accommodation or take out more debt in later life. With £100,000 being all they can leave, perhaps to three children, the proposed system would have powerful incentives to spend or give money away early on in retirement, and then get state-funded care.
Savings incentives for Care Isas or using pensions to help fund care are also vital. Just changing the means-test threshold or introducing a cap on total care costs such as proposed by Dilnot was only ever part of the solution to the care crisis. Today’s baby-boomers are already retiring and many of them do have Isas and even pension funds that they may not need to cover all their living costs in their 60s and 70s. Therefore, there is time to introduce incentives for older people to build up or use existing assets to pay for care. Currently, there are no such incentives and nobody has savings earmarked for this. Encouraging people to save up to a maximum care cap, say £72,000 per person in a Care Isa that can be passed on free of inheritance tax, or withdraw up to £72,000 tax-free from their pension to pay for care, could help people protect themselves, without fearing they will lose almost everything if they get an illness such as dementia.