Lord Warner: Treasury must reconsider 'death tax' to meet soaring cost of elderly care

The Labour peer, a member of the Dilnot Commission, said the Government was “drifting” on social care reform and that people in state-funded care homes were in danger of not receiving proper services due to lack of money.

The Dilnot Commisson, chaired by economist Andrew Dilnot, published its report last year suggesting that pensioners would have to pay up to £50,000 of their care home costs before the state stepped in.

But the Government has been accused of 'kicking the findings into the long grass.'

Today, Lord Warner said ministers were moving towards doing “nothing” to change the current system.

Speaking on BBC Radio 4’s Today programme, he said: "We were very clear in the commission that you had to expect the generation who were going to benefit from this to pay more towards the cost of their care.

"How you do that is a bit tricky, I accept that. The Treasury really ought to start thinking about this."

Lord Warner suggested removing the tax exemption for those paying National Insurance after retirement to raise money.

He also said the Government must look at clawing back the cost after death - a proposal put forward by Labour and branded a 'death tax' by the Tories.

"You should look at collecting the money after death. You could actually let people build up a cost which they would pay, in effect, like student loans and they pay interest on it and they pay it off from the estate. You could put a levy on inheritance tax."

He added: “If you do nothing, which is what we’re drifting towards, what you are going to end up with are state funded residents in nursing homes and residential care homes not receiving services.”

His comments were echoed by shadow health secretary Andy Burnham, who insisted the Government must find a solution to the “cruel lottery” of funding to protect the most vulnerable.

He said “leaving the current flawed system in place would be the worst of all possible worlds," accusing the Government of inertia due to “fear of the political impact.”

Offering to suspend party politics in order to find a solution, Mr Burnham warned politicians were in danger of failing millions of older people after stalling.

Conservative MP Matthew Hancock said the Government was “moving towards a solution” but cross-party agreement was essential.

He said the cost of care for the 10 per cent of people who required 10 or 20 years of care was “enormous”, and said he would look towards being able to “insure against these problems”.

He added that “everybody is agreed that it is vital” to reach a solution to the problem of the “lottery in the cost of social care”, adding it was “reasonable to have some form of insurance”.

But Lord Warner pointed out such insurance companies would only risk entering the market to offer policies if the state could provide assurances and support for those “unpredictable” cases where individuals would need unprecedented levels of care.

He said the current system, where the elderly spent their own money on care down to £23,000 of savings, was “really unfair”.

“These people are not wealthy,” he said. “We have actually got a situation where relatively poor people are spending all their assets to pay for their care.

“If you do nothing, which is where we're drifting towards, what you are going to end up with - and it's getting there now even as we speak - are state funded residents in nursing homes and residential care homes or domiciliary care not receiving services.

“Because the providers of those services cannot continue to provide those services at the levels of reimbursement they are getting.”

His recommendations come as ministers struggle to reach an agreement on social care funding, following the recommendations of the Dilnot Commission.

The commission has already recommended introducing a cap of £35,000 on the lifetime care bills that individuals will be expected to pay, with a more generous means test for the poorest.

Under the plan, the state would meet any bills above this level, although the accommodation element of residential care home bills would still need to be covered by individuals.

An estimated 20,000 people are forced to sell their homes to pay for care each year. The Treasury is reluctant to agree to the Dilnot plans, which would cost an estimated £1.7 billion more each year.

Last month, the Nuffield Trust called for middle class pensioners to pay extra taxes or lose benefits such as winter fuel allowances and bus passes to help pay for the cost of care in old age.

It argued that people in their late 50s and 60s already have the largest share of wealth in Britain and should be asked to contribute more.


Sourced from the Telegraph, 19th June 2012.