Financial News

  • 11 February 2013, 12:15

Elderly Care Bills To Be Capped At 75,000

Elderly care bills are to be capped by the state in a 1bn move expected to be funded by dragging more people into inheritance tax.

The cap on how much pensioners pay for care is to be set at 75,000, more than double the 35,000 recommended by the Dilnot Commission.

But the assets threshold beneath which people will receive means-tested support is to be hiked significantly - up from 23,250 to 123,000.

The plans will be part-funded by extending the freeze of the inheritance tax threshold, which currently kicks in at 40% at 325,000 or 650,000 for couples.

Abandoning what was a flagship pledge to increase the threshold risks stoking Tory anger at Chancellor George Osborne and could further damage Conservative support.

Before the last election, Mr Osborne said he would raise the limit to 1m. It was claimed this would help four million Britons who had worked hard to build up an inheritance.

The move in autumn 2007 was widely credited with reviving the Conservatives' fortunes and forcing Gordon Brown's disastrous decision to abandon plans for a snap general election.

Once in coalition, the Conservatives agreed to shelve its plans in order to prioritise rises to income tax thresholds.

But only weeks ago, in his Autumn Statement, the Chancellor said inheritance tax thresholds would rise by 1% in 2015/16 to 329,000 per person.

This too has now been abandoned.

Health Secretary Jeremy Hunt will outline the elderly care proposals for England in a statement to the House of Commons this afternoon.

Ahead of the announcement, he 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.

"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."

He claimed this would be a "fully-funded solution" that would allow insurers to provide a proper system to cover elderly care.

Mr Hunt described the current situation, where 30,000-40,000 people a year have to sell their homes to pay for care, as a "scandal".

The decision to set the cap at 75,000 comes despite extensive briefings last summer in which David Cameron and Nick Clegg agreed they would implement the Dilnot recommendations in full.

Andrew Dilnot admitted he regretted the high cap but insisted it would mean pensioners would no longer have to be "terrified" about the consequences if they need care.

"I recognise that the public finances are in a pretty tricky state. It doesn't seem to me that it is so different from what we wanted as to radically transform the basis of the system," he said.

But the National Pensioners Convention (NPC) attacked the 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% of those needing care, whilst the majority will be left to struggle on with a third rate service.

"The Government needs to be much braver and bolder if it is really going to sort out the problems - otherwise in a few years time we'll be back again having another look at the issue."

Shadow care and older people's minister Liz Kendall warned: "This would be a small step forward for some people who need residential care in five or more years time but it won't be fair for people with modest homes."

Stephen Gay, from the Association of British Insurers, said: "The cap and the higher means-test give people greater certainty and will enable them to plan ahead for later life."

But David Rogers, chairman of the Local Government Association's community wellbeing board, warned: "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 under-funded and unable to cope with the pressures of our rapidly ageing population."

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