The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Bethell) (Con)

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My Lords, I congratulate my noble friend Lord Lilley on securing time for the Second Reading of this important Bill. I thank him for bringing forward this challenging legislation, which addresses the pressing issue of unpredictable and catastrophic adult social care costs. Nothing could be more salient. As he said, my noble friend Lord Lilley brings 37 years in Parliament and seven years in Cabinet to bear on this, and it shows. His Bill is a most thoughtful and intelligent proposal to address an electric issue that has confounded policymakers for a generation and now engages the best minds in government.

I very much note the mood of the Chamber and in particular the supportive comments by the noble Lord, Lord Wigley. I cannot promise that the Government will support the Bill. However, I assure my noble friend that we have carefully considered its points and that its insight has provoked a timely dialogue.

Clause 1(1) is on the measures for insurance to be delivered through a public not-for-profit company owned and guaranteed by government. As my noble friend Lady Neville-Rolfe rightly points out, social care should lend itself to risk pooling. Many of us are likely to need care at some point in our lives. Three out of four adults over the age of 65 will face care costs at some point. Half will face care costs of less than £22,000, but around one in seven will face costs of more than £100,000.

Despite this, as my noble friend Lord Lilley pointed out, affordable financial products to provide protection against unpredictable and catastrophic care costs are currently unavailable. A small insurance market grew momentarily in the 1990s, but noble Lords should note that insurers cited both supply-side and demand-side difficulties. The fact that there is currently no private market for insurance does not mean that there is no case for insurance. Singapore has a government-run insurance scheme, voluntary for people born before 1979. The Bill shines a valuable light on a classic but none the less long-standing and damaging market failure. It therefore provides a strong case for government intervention.

Clause 1(3) specifies that the purchase of the insurance should be voluntary and that

“home owners who choose not to purchase the insurance continue to be subject to existing regulations regarding the provision of social care.”

The current means-tested system is based on personal responsibility, with financial help focused on those with the least. It is appealing that the Bill builds on this principle, offering people the option to pool the risk of needing care but placing a responsibility on individuals to plan for care.

Clause 5, on timing, sets out that the insurance offer should be targeted specifically at those approaching state pension age. At this age, still relatively few people need care and it is unlikely that people can accurately predict whether they will eventually require care. Among those aged 55 to 64, only 5% receive formal or informal care, compared with 13% of those aged 75 to 84 and 33% of those aged 85 or over. In response to the point from the noble Lord, Lord Best, this mitigates against the risk of only those who know they will need care choosing to buy insurance, driving up prices. This also allows the insurance to pool both longevity risks and the risk of needing care in the first place. This in turn should help keep premium costs down.

The measures in Clause 2(6) and 2(7) set out that the insurance premia should be

“set at a fixed fraction of the value of the property, net of mortgage.”

This means that someone with significant housing wealth would pay more for the insurance than someone with only modest wealth.

The Bill makes an important comment on the current system. Someone with a care journey of, say, two years in residential care, at cost of £700 per week, with an income of £9,200 a year and starting wealth of £50,000, could deplete up to 57% of their wealth, whereas someone with wealth of £250,000 would deplete only 23%. The Bill has the commendable feature of being both progressive and affordable—a challenging combination.

Clause 3(1) describes that the insured person would be entitled to pay for the premium through a charge on their home realised upon the death of the insured person or the sale of the property. The Bill picks up on an important point here. Even if the cost of the insurance policy were just a small fraction of the value of one’s home, not everyone would be able to afford to pay for it from their savings. After all, as my noble friend Lord Lilley described in clear detail, many people have only limited wealth other than what is tied up in their home. Nearly half of adults over the age of 65 have savings of less than £25,000 and 36% have savings of less than £12,500. Of course, people could draw on their pension pots, but this may be subject to income tax. Therefore, allowing people to pay for the insurance by releasing some of the value of their home prevents people having to sell their home to pay for the insurance. The attraction of this was well described by my noble and learned friend Lord Mackay, and I note the similarity with deferred payment agreements. All this illustrates the strength of the Bill and my noble friend’s proposals; his timing is also impeccable.

Some noble Lords made clear their objections and have emphasised the huge sense of challenge around social care. The noble Lord, Lord Davies, noted the vagaries of the property market and the spread of tenure. The noble Baronesses, Lady Merron, Lady Chakrabarti, Lady Bryan, and the noble Lord, Lord Foulkes, made passionate cases for a nationally funded public social care service. My noble friend Lady Altmann called for a national health and social care insurance premium. The noble Baroness, Lady Greengross, raised the huge challenges of intergenerational fairness. My noble friend Lady Wheatcroft, urged the importance of investment in healthy lives, diet and exercise to minimise social care costs. These are all important points.

The Government’s objectives for reform are to enable an affordable, high-quality and sustainable adult social care system that meets all people’s needs. Every person should receive the care they need, provided with the dignity that every person deserves. The noble Lord, Lord Hendy, was very emphatic in describing the importance of a social care workforce as critical to our ambitions for raising the quality and access to social care. He is right in this. I therefore reassure my noble friend Lady Verma and the noble Lord, Lord Hendy, that in his first few days in his new role, the Secretary of State for Health and Social Care wrote a letter addressed to social care staff with a promise to do all he could to support the sector in the future. I say to the noble Baroness, Lady Watkins, that the Prime Minister has been very clear that we need a long-term plan for social care. As she will know from today’s papers, the details are emerging as we speak. With these things in mind, I once again thank my noble friend for his valuable contribution and express my gratitude to him for his Bill.

The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Kamall) (Con)

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My Lords, I begin by thanking the noble Baroness, and the Lord Speaker for allowing us time for this debate. I congratulate my noble friend Lord Lilley on securing the time for Third Reading of the Bill, which proposes a state-backed insurance company for social care. I am sure noble Lords across the House will wish my noble friend a speedy recovery. I thank him for his thoughtful proposal to address the long-standing issue of unpredictable social care costs. As many noble Lords will recognise, there have been many reports over the last few decades and they have just sat there gathering dust on shelves: to date, we still do not have a proper system. The Government wholeheartedly agree with much of the analysis underpinning the Bill and I shall mention but a few of the ideas that stood out for us.

First, we are well aware of the challenges around the private market delivering insurance for social care costs, so we recognise the benefits of delivering insurance through a public not-for-profit company owned and guaranteed by government. I also particularly admired how the proposal addresses affordability by allowing people to pay for the insurance premium through equity on their home. Lastly—this is probably the Bill’s strongest selling point—it would be cost-neutral to the Exchequer. I recognise the opportunity this presents for the savings to be invested in financial support for those not able to access the insurance offer—for example, people who do not own a home.

I reassure my noble friend that his proposal has been carefully considered in the lead up to the announcement of our reform package from October 2023, but I point out that one of the key benefits of the cap and extended means test is that it is a universal offer—universal for everyone, irrespective of age or home ownership. We believe that a universal cap means people can plan ahead for their care from the outset. Knowing that the cap is there will benefit everyone, not just those who own a home. The home ownership landscape is changing over time, and within that context the Government have developed a package of reforms which is future-proof and gives support and certainty to the current generation, as well as future generations.

In addition to the cap, from October 2023, anyone with assets of less than £20,000 will not have to make any contribution for their care from their savings or the value of their home, ensuring that those with the least are protected. Anyone with assets below £100,000 will be eligible for some means-tested support, helping people without substantial assets and ensuring that many more people benefit from funded support earlier in their care journey. We believe that our reforms significantly improve the current system. In developing the reforms, we had to make tough choices, balancing the generosity of the reforms with how much extra we ask taxpayers to contribute and pay for them. My noble friend may disagree with our current formulation of the cap, but we believe the plan is credible, deliverable and affordable. Therefore, while the Government are not convinced that the Bill is the right course of action, we agree with his intelligent analysis that underpins it and, as the noble Baroness, Lady Merron, said, we will debate this further.

I again thank my noble friend Lord Lilley for putting forward this proposed Bill, and for his engagement in discussing our reforms after this debate.