Social Care Funding

Earl Howe Excerpts

Monday 11th February 2013 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, with the leave of the House I shall now repeat a Statement made earlier today in another place by my right honourable friend the Secretary of State for Health, on the funding of care and support in England. The Statement is as follows:

“With permission, Mr Speaker, I would like to make a Statement on the funding of care and support in England. As we get older, none of us can have any way of knowing what care needs we will eventually face. Some will be blessed with a long and healthy life, but many others will be less fortunate.

Today many older people and people with disabilities face paying the limitless—often ruinous—costs of their care, with little or no assistance from the state. While those with assets of less than £23,250 do receive support, those with assets above this level receive none. This is desperately unfair, particularly for those who have worked hard all their lives to pay off their mortgage, to save for their future or to have something to pass on to their loved ones, only to see their property sold and their savings wiped out—something that happens to more than 30,000 people every year or 100 people every day. The system we have also sends out the wrong message: that you are better off not saving for your future because any savings will only disappear in a puff of smoke.

Today I can announce this Government’s radical plans to transform the funding of care and support in England, bringing a new degree of certainty, fairness and peace of mind to the costs of old age, disability and living with long-term conditions, while ensuring that the greatest level of financial support goes to those with the greatest need. We propose to introduce a cap on an individual’s financial contributions towards the cost of care, and a significant increase in the level of assets a person may hold and still receive some degree of support from the state.

In 2010 this Government asked the economist Andrew Dilnot to look at the whole issue of funding for care and support. The independent Dilnot commission published its recommendations in July 2011. In response to those recommendations, and following extensive engagement with the care and support sector, we published the Care and Support White Paper and the progress report on funding reform in July 2012.

In the progress report, we accepted some of Andrew Dilnot’s main recommendations, including those around a consistent, nationally set eligibility threshold for care and support, and universal deferred payments—whereby no one will have to sell their home in their lifetime to pay for care costs. I would like to take this opportunity to thank Mr Dilnot and his team for their excellent work.

A core principle set out by the Dilnot commission was that people should contribute to the costs of their own care but that those costs should be limited and people should be protected against the potentially catastrophic costs of care. This should come through a cap on those costs, and an extended means test. One person in 10 will be faced with care costs in excess of £100,000, with a small number facing costs significantly higher still.

To give everyone peace of mind, from April 2017 we will introduce a cap on the amount that someone over state pension age will be liable to pay. The Dilnot commission’s original suggestion was for a cap of between £25,000 and £50,000 in 2010-11 prices, which is the equivalent of between £30,700 and £61,500 in April 2017 prices. Despite the extremely challenging economic situation we find ourselves in, we have come as close to this range as possible.

The cap will be set at £61,000 in 2010-11 prices, or £75,000 once it is introduced in April 2017. The intention is not that people should have to pay up to £75,000 for their care costs. But by creating certainty that this is the maximum they will have to pay, they can then make provision through insurance or pension products so that they are covered up to the value of the cap, thereby reducing the risk of selling their home or losing an inheritance they have worked hard to pass on to their family.

Young people who already have care needs when they turn 18 will now receive free adult care and support when they reach 18. People who develop a care need after 18 but before state pension age will be protected by a cap that is below the £75,000 threshold.

The other measure that we propose is significantly to increase the amount of assets that a person can hold and still receive financial support for their residential care- home costs. Currently, this is set at £23,250. If a person has assets valued above this level, including, in some circumstances, the value of their home, they receive no support. The Dilnot commission recommended that this threshold be raised dramatically to £100,000 in 2010-11 prices. We accept this recommendation.

From April 2017, the threshold will be increased so that those with assets worth £123,000 or less, equivalent to Dilnot’s recommended level, will all receive some degree of financial support for their care costs. People with the fewest assets will receive the most support. This will, for the first time, provide financial protection for those with modest wealth, while ensuring that the poorest continue to have all or the majority of their costs paid.

Everyone will benefit from the peace of mind that a cap brings. The introduction of a cap and the extended means-tested support will help many people in the most challenging circumstances—we expect up to 16% of older people who need care to face costs of £75,000 or more. But, of course, none of us knows whether we will be one of that 16%. Everyone will benefit from the peace of mind that these changes bring and, by 2025, up to 100,000 more older people will receive financial support for their care costs as a result.

My right honourable friend the Chancellor and the Treasury have rightly insisted that we identify how we pay for the additional costs of these proposals. In this day and age, making promises that you cannot pay for makes those promises meaningless. We have therefore identified exactly how to pay for them. These reforms will cost the Exchequer £1 billion a year by the end of the next Parliament. With the agreement of the Chancellor, they will be met in part by freezing the inheritance tax threshold at £325,000 for a further three years from 2015-16. The Chancellor and the Chief Secretary to the Treasury have agreed that the remaining costs over the course of the next Parliament will be met from public and private sector employer national insurance contributions revenue associated with the end of contracting-out as part of the introduction of the single-tier pension.

These two new proposals join with others previously announced when we published the draft care and support White Paper last summer. They include, from 2015, the ability of people to defer the payment of residential care costs so that no one needs sell their own home to pay for them during their lifetime. Also from 2015, a national minimum eligibility threshold will be introduced to end the lottery of local access that can see support provided to someone in one area but not in another. Taken together, today’s proposals and those already set out in the draft care and support Bill represent a new era of support for the elderly and disabled in England.

Thanks to the certainty that these proposals will introduce, people should no longer feel that they have to hoard every penny in case the very worst happens or feel that they are powerless and that there is no point in saving at all. Rather, they will be able to plan and prepare sensibly for their future. This will be supported by a wider range of financial products becoming available in the market designed to help people to plan and prepare for their later years and to reassure them about how much they will pay. We will work with the care and support sector—with local authorities, charities, care providers and individuals, and with the financial services industry—to develop these plans and to introduce them practically.

Our society is ageing. By 2030, the number of people aged over 85 will double, and the number of people with dementia will exceed 1 million. As the number of older people with such long-term conditions increases, we need to become a society where people prepare and plan for their social care costs as much as they prepare and plan for their pension. Sadly, this is an issue that Governments of all colours have long failed to tackle. While there are many other things that need to be done to prepare for an ageing population, these reforms herald a historic change in the way that care and support is funded in this country.

The economic circumstances are challenging, but these commitments demonstrate our determination to help people who have worked hard, saved and done the right thing to prepare for the uncertain hand that fate deals to all of us in old age. By introducing these reforms within the timescale and at the thresholds set out, they will also be sustainable and consistent with our overriding priority to reduce the deficit inherited from the previous Government. We want our country to be one of the best places in the world to grow old. These plans will give certainty and peace of mind about the cost of care, making sure that we can all get the support we need without facing unlimited costs, while also ensuring that the most support goes to those in greatest need. I commend this Statement to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Earl Howe]

My Lords, first, I thank the noble Lord, Lord Hunt of Kings Heath, for his positive welcome for at least some elements of the Statement, which I know reflect the view of his own party on some of the principles enunciated by Dilnot and which have not been a matter of disagreement between us. I am very pleased that those principles are reflected in the structure that the Government have announced.

The noble Lord began by saying that we needed a holistic approach to the funding and delivery of social care. I could not agree with him more but it is important to remember that the remit given to the Dilnot commission focused on one particular aspect of social care funding. It never pretended to give it an instruction to solve every problem that faces us over the next 10 to 20 years in funding social care, or indeed to tell us how we raise the quality of social care or give life to the prevention agenda, which I know is as close to the noble Lord’s heart as it is to mine. He rightly said that the NHS has an important part to play in that.

The financing of local authorities is a major issue, which we still have to grapple with. I do not duck that and I would of course welcome cross-party consensus on that issue, if it can be reached. However, reading some of the public’s comments today on the Government’s announcement, they have been on the whole very measured. While some regret that we were not able to conform precisely to the parameters that Dilnot recommended in terms of the cap, nevertheless we have got reasonably close to them given the current economic circumstances that we face.

The noble Lord asked me whether the announcement we have made passed a key test, which is: will these arrangements help every person in the country? My answer is: yes indeed they will, because everybody in the country will now get the reassurance that, whatever their circumstances, they will get the long-term care and support that they need without facing financial ruin. People will benefit wherever they receive care, be that in a care home or in their own home, and they will be more in control—they will be more easily able to plan and prepare for the care and support that they might need at some time in future.

On that score, the noble Lord asked me about products that may be developed by the financial services sector. We have engaged very fully with the sector, and we are under no misapprehension that it has been as keen as anyone to see this announcement. The certainty that it gives firms in that sector will enable them to develop products that they can market to those who would like to provide for their old age and their care costs in an affordable way, and we are now giving them the freedom and scope to do that.

The noble Lord asked how the cap will actually work. It will cover eligible social care costs that the local authority assesses that it would meet at a price that the local authority would pay. Individuals would be responsible for meeting their eligibility care costs up to the cap. Where they cannot afford to do so, the local authority will provide financial support, as I have said, to those with less than £100,000 of assets in 2010-11 prices who are in residential care. This will rise to around £123,000 at implementation. The cap would cover the cost of social care. Someone in residential care will always be responsible for a contribution to their general living costs—that is, their heat, food and light—as they would when living at home. That amount would be set nationally at around £10,000 in 2010-11 prices, as recommended by Dilnot, but anyone who is unable to afford that will be helped by the local authority. We view that flat contribution to hotel costs, if I can describe them that way, as a fair way of implementing a rule around the country that is easy for everyone to understand and does not involve massive bureaucracy. Altogether, the design of the cap sets out what we believe is a fair partnership between the state and the individual that protects individuals from the prospect of catastrophic costs.

The noble Lord indicated that the Association of British Insurers was disquieted by this announcement, but in fact today the ABI said that the reforms were a potential step forward. Stephen Gay, their director of life savings and protection, said:

“This is potentially another positive step forward in tackling the challenges of an ageing society. The cap and the higher means test give people greater certainty and will enable them to plan ahead for later life. What is important now is to work through the implementation of what is a complex system, and we are looking forward to working with government and the care sector”.

I read that as a reasonably positive endorsement of this package.

The noble Lord asked me about draft clauses for the Care and Support Bill. It is not our intention to publish draft clauses designed to implement Dilnot. Instead, as and when the Bill is introduced to Parliament—and I cannot give any commitment as to when that will be—we will have inserted the relevant clauses for consideration by both Houses, and we believe that that is the right way to set about things. With regard to a debate in your Lordships’ House, I will willingly pass the noble Lord’s suggestion to our colleagues in the usual channels.

--- Later in debate ---

[Baroness Northover]

My Lords, I interrupt briefly to say that if noble Lords make brief contributions more of their colleagues will be able to get in this critical debate.

[Earl Howe]

My Lords, I am grateful to my noble friend for her remarks. She is of course quite right; many of us have heard for years the concerns of members of the public, friends and family about what might be the catastrophic burden of care costs in old age. If there is one thing that everyone should welcome, it is that aspect of this announcement. With regard to a rebate, no, that is not in our sights at the moment. If someone were to die in the circumstances posited by my noble friend, the arrangement would have to remain as set out to that person at the outset. We would not expect to move the goalposts after that person had died.

[Lord Warner]

My Lords, I should declare my interest as a member of the Dilnot commission. It would be churlish not to welcome the Government’s acceptance in large part of the Dilnot architecture for reforming the funding of social care for the medium and longer term.

I have a couple of questions for the Minister. As I understood what he was saying, the new capping system is likely to start in 2017-18. I understood him to be saying that a new national threshold for eligibility criteria would start at the same time. That would therefore mean that the present eligibility criteria, interpreted by local authorities, would stay in existence for another four years, so we would have four more years of the tightening of those eligibility criteria.

I remind the Minister of a paragraph in our report that drew attention to the fact that there was strong evidence of a major shortfall in the existing funding of social care that could not be put right by our recommendations, and that if those problems were not resolved on a cross-party basis, they would simply undermine the functioning of our recommendations in the medium to longer term.

[Earl Howe]

My Lords, I hope that I can put the noble Lord’s mind at rest. In doing so, I thank him once again for the work he did on the Dilnot commission. It is our intention that the eligibility criteria will be introduced from April 2015—so, in advance of the Dilnot arrangements. As he well knows, that national minimum eligibility will be set to make access to care more consistent around the country. In addition, carers will have a legal right to an assessment to care for the first time. I take his point about trying to achieve cross-party consensus on social care funding.

As for funding in the existing system, in the last spending review we made, as he knows, an additional £7.2 billion over four years available for care and support. Since then, we have provided local authorities with an additional half a billion pounds. We believe the challenge creates an opportunity for local authorities to innovate and to explore new ways of working better to meet the needs of their local populations and to optimise the use of the resources that they have. Many local authorities are already innovating, and we are committed to supporting them to deliver further service improvements.

[Lord Sutherland of Houndwood]

My Lords, I am pleased to welcome the Government’s Statement today. This has been a long time in the waiting, not simply from this coalition Government, who have done well to get this far, but from previous Governments. There has been prevarication for more than 10 years, and it is about time we got started. We have now started. As has been said, this is a first step on the way. There are many steps to be taken thereafter, and a great deal of discussion and, if possible, cross-party consensus would be useful.

Will the Minister confirm that an adequate length of time will be made available for that, not simply a Question for Short Debate, in the near future? Secondly, will he confirm that it would be open to any Government, perhaps his own Government, to look again at the financial thresholds that they are setting in this Statement as and when, as we all hope, the economy improves?

[Earl Howe]

I am grateful to the noble Lord, Lord Sutherland, and pay tribute to his work over many years in this field and in the royal commission some years ago. I will convey his wishes to my noble friend and other members of the usual channels. I agree that it would be unsatisfactory to have an unduly short debate on a complex and important subject.

As regards the thresholds, I hope I can reassure him. It is our intention, as I mentioned, to introduce clauses into the care and support Bill when it reaches Parliament that would embody the essence of the Dilnot proposals but to leave it to regulations to set the relevant numbers for the cap and the means test, for example, so that it would be a relatively easy matter for a future Government, if they so wished in brighter economic circumstances, to change those figures if they felt that that was the right thing to do.

[Lord Lipsey]

My Lords, better half a loaf than no loaf at all and, to that extent, I welcome the Government’s Statement. Does the Minister agree with all noble Lords who have spoken who have emphasised the importance of all-party agreement, if it can be obtained on this subject, so that old people know the background they have to plan against when looking to their futures? With that in mind, will he meet one of the points made by my noble friend Lord Hunt by trying to make this package slightly more favourable to the less well off and not, as it is, somewhat, at the moment tilted towards the better off, so that it is easier to achieve that all-party agreement and to go forward united to something that all old people will so greatly welcome?

[Earl Howe]

My Lords, I thank the noble Lord. I am with him in spirit. I say that because not only do I believe in cross-party consensus on a matter as important as this, but I hope he will accept from me that the way we have tried to structure this package, taking the cap and the means test in combination, has precisely been to target those of more modest means. Currently only those with assets of less than £23,250 and a low income receive help from the state with their care costs. Our changes will mean that those with property value and savings of £100,000 or less in 2010 prices will start to receive financial support. That means that the most support will go to those in greatest need. I am advised that had we, for example, opted for a higher means-test threshold, it would not in practice have brought into the net that many more people. We felt that the fairest way of cutting the cake was to try to concentrate the benefit on those of lowest means while also removing the fear of catastrophic care costs from everybody in the system.

[Baroness Jolly]

My Lords, we on these Benches are delighted that the Government decided to implement the principles of the Dilnot report. The care and support Bill places a duty on local authorities to provide information and advice. In addition, there will be a need to set up some sort of taxi-metering system in order to achieve that outcome. Has the Minister any idea about how that might be achieved?

[Earl Howe]

My noble friend is absolutely right. One of the tasks that faces us over the next two or three years is to ensure that every member of the public has easy access to information which enables them to make plans and take decisions about their own or their family’s future. We will therefore be working very closely with local authorities on that front. It is important that there are websites. My department is already devoting a section of its website to appropriate information on this front. More generally, we need to ensure that the system is not only fair to people, but clear to people.

[Baroness Pitkeathley]

Following the question from the noble Baroness, Lady Jolly, I believe it is the Chinese who say that a journey of a thousand miles starts with a single step. We have certainly made more than a single step today, on which I congratulate the Government. Two major problems remain, as other noble Lords have said. First, there is not enough money in the system, and secondly, people do not know about it. They do not know that they have to pay for social care, never mind up to £75,000. Is the Minister confident that what he said about information and advice—and this is yet another responsibility for local authorities, which are already strapped for cash—will enable people to plan in the way to which he is so clearly committed?

[Earl Howe]

I quizzed my officials very closely on that very point only this morning and received very firm reassurances on that front. I completely agree with the noble Baroness about how important this is. She is right; there is a widespread lack of knowledge among the general public about what they are entitled to and what they may not be entitled to. Collectively, we need to put that right. I take her point about additional burdens on local authorities, but ultimately I hope that they will see it as in their own interests to inform the public before they are inundated with questions that will take them a lot of time and effort to answer. I can assure her that work on these lines will be very vigorous, and I will be happy to keep her up to date on the work we are doing over the months ahead.

[Lord Cormack]

Does my noble friend agree that it is a pity that so many details were given to the media this morning before we had them in Parliament? Will he clarify one point that he made in his answer to the noble Lord, Lord Warner? He said that the eligibility criteria would change as from 2015. The new system will not be operative until 2017. What precisely does that mean?

[Earl Howe]

First, I completely agree with my noble friend that the leak to the media over the weekend was highly regrettable. I do not know how it occurred. It certainly was not of my making or that of my ministerial colleagues in the Department of Health. We wished to make this announcement to Parliament first of all, and I am sorry that that did not happen.

My noble friend’s second question relates to the national minimum eligibility threshold. We believe that that can be introduced in advance of the Dilnot package because what it is designed to do, as I explained earlier, is to give people greater certainty about their access to care wherever they live around the country, particularly for those who move from one place to another. That is a separate issue from those covered by Dilnot, although it was one of those which the commission considered. It is separate from the issue of the cap or the means test, which we believe can logically come in at a later date.

[Baroness McIntosh of Hudnall]

My Lords, as one of those in the Chamber today who is not an expert on social care matters, I ask the noble Earl whether he can reassure the great many people who are hearing about this for the first time as to what it means in practice for them when they have to start paying for social care—or, more particularly, when they become in need of social care. When we have a Budget, newspapers often produce ready reckoners, showing the impact of tax rises, reductions or whatever is being introduced on people in particular circumstances. Will the Minister encourage his department, and encourage his department to encourage local authorities, to produce the kind of information that ordinary people can understand, which will show them in easily understood, ready-reckoner terms what they will be in for if they need long-term care?

[Earl Howe]

My Lords, I absolutely agree with the noble Baroness on how important this is. It is quite complex to explain the whole system in words. The system will depend on the operation of a sliding scale which, by its nature, is difficult to describe other than pictorially. Nevertheless, the basics of the rules of these funding arrangements are straightforward and can be described. They are, as the Statement described, two essential elements, being the maximum level that people have to pay for their care—which we are setting at £61,000 in 2010 prices; £75,000 in 2017—and the means test, which is £100,000.

Of course, there are nuances around that, such as around couples and how the system will work for them. That is a question that the noble Lord, Lord Hunt, asked me which I did not answer. At present, a couple could potentially face two sets of unlimited care costs. By protecting them from these costs, the reforms offer them significant benefits which need to be spelt out. In most circumstances, even if a couple both had care costs at £75,000, the level of the cap, they would contribute less than this because housing assets do not count towards the means test if one of the partners remains resident in the home. All those sorts of things need to be made clear. We will do our very best to work with others to ensure that these messages have not only the greatest clarity but the greatest coverage.

[Lord Pearson of Rannoch]

My Lords, I do not want to make a European point so much as to ask the Government whether they have not got their spending priorities tragically wrong. In our previous debate, I asked the noble Lord the Leader of the House how he could justify sending £11 billion in net cash annually to Brussels to be filtered away. Here we are, with this debate on the Dilnot commission, and, from the remarks of the noble Lord, Lord Hunt, we have made a step forward. However, clearly this is not adequate to look after the needs of our old and infirm for many years.

How can the Government throw away £11 billion with one hand and then say that we cannot afford more than £1 billion by the end of the next Parliament to look after our old and infirm? Are we a civilised society?

[Earl Howe]

My Lords, I hope that we are a civilised society. While I understand the noble Lord’s point of view on the European Union, the fact is that if we are fully paid-up members of the European Union we have legal obligations to contribute to the Community budget. That is a given.

However, like any Government, we need to look at the totality of government commitments in the round. We have decided that, against competing priorities, this is a very high priority. That is why we have brought forward these proposals.