Care: Financial Services Industry

Earl Howe Excerpts

Wednesday 26th February 2014 Lords Chamber

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

My Lords, I begin by thanking the noble Lord, Lord Lipsey, for raising this very important issue. I thank equally all speakers for their contributions to the debate. The noble Lord, Lord Lipsey, and I have conversed many times of late on the Floor of the House about the provisions of the Care Bill, so I am in no doubt that he is very well acquainted—perhaps more than most of your Lordships—with the recommendations of the Dilnot commission on the funding of care and support. However, for the benefit of others who may not have been following as closely, I will take a moment or two to refresh our memories.

The commission found that the current system is simply unsustainable and not fit for purpose. We need to ensure that we have a system that is sustainable and that people do not face catastrophic care costs. This is what the reforms we are introducing will do. The commission defined a new model for funding care and support—a new partnership between the individual and the state. It suggested that where individuals can afford to contribute they should do so but that it was simply not fair to expect people to spend their lifetime savings meeting the cost of their care. To address this current imbalance we are putting in place a cap on care costs, as recommended by the commission, to provide people with an insurance against catastrophic costs and the fear and worry that these can bring. We are also extending the means test and, as a result, we will be giving 35,000 more people means-tested support with their care costs immediately when the system comes in.

These are all ways that the state will be providing additional protection. However, we must remember that what the commission described was a partnership, and there are at least two sides to every partnership. It recommended that where they can afford to do so, individuals should also contribute. It is just as important, perhaps even more so, to make sure that we are providing individuals with the support they need to meet their contribution. We as government are providing flexibility through the introduction of the universal deferred payment scheme and additional support through the new Clause 4 duty on local authorities to provide financial information and advice. I shall say more about that in a moment.

We cannot, however, do this alone. The financial services sector needs to provide some support, too. The noble Lord, Lord Lipsey, recommended Ministers to go away and think about a postponement of the deferred payment scheme. I am sure he would agree with me that the deferred payment agreements perform a very important function and are one of the ways in which people can pay for their care more flexibly. Local authorities, as he is aware, already offer deferred payments. That gives me grounds for believing, and indeed having confidence in believing, that they have the ability to implement the universal scheme in April of next year. Given the fundamental function that these deferred payment agreements will fulfil, I am very hesitant, if not reluctant, to consider delaying the universal scheme. However, I will convey the noble Lord’s views to my honourable friend Norman Lamb.

I should like to address the precise question placed before me by the noble Lord, Lord Lipsey. He asked what plans the Government have for the role of the financial services industry in funding care provision in the light of the Dilnot commission reforms. My straight answer to that question would need to be that we have no direct plans because the industry is independent of government and, as such, we have no control over what it does. We cannot compel it to play any role, however much we might like to. I cannot say what plans we have, but I can tell the noble Lord about the joint work that we have been doing with the industry, our shared ambitions and our commitment to continue this joint working—a commitment, incidentally, reinforced by the briefing issued by the ABI ahead of this debate.

In March 2013, the Department of Health invited companies from the financial services industry to conduct a review of financial products to fund care—the opportunities that the Care Bill would provide and the barriers that needed to be overcome for it to flourish. The review reports were published on 21 January this year, alongside a joint statement of intent between industry and government, where we both committed to working together on this agenda. The industry-led review told us that the introduction of the Care Bill reforms would largely give us the right conditions for a market of care products to emerge. I do not think we should overlook the importance of that finding. Further, the reports confirmed that industry saw itself as able to play an important role in helping people to plan for their care and support needs—again, a sentiment reinforced by the ABI in its briefing yesterday.

However, that does not mean that our job is done. We need to be realistic about what we might expect, and when. More work needs to be done and there are some barriers to overcome if we are to see this market take off. Again, I have no need to familiarise the noble Lord, Lord Lipsey, with some of those barriers. Indeed, he has spoken of them in the debate. Public awareness of how care is funded is woefully low. We need to build an understanding, a greater awareness of how the system works and the need for people to plan and prepare for future care needs—something that the Government have already committed to do. My noble friend Lady Brinton asked how demand for financial products could be stimulated. We need to make sure that there is good information and advice to support and enable people to make well informed decisions about the types of care they want to receive and how they can pay for it—something that we will ensure happens through the new information and advice duty on local authorities.

To be successful, an awareness campaign needs to be delivered in partnership—national and local government working alongside the wider care sector. We are already working with partners to develop the right approach. I can tell the noble Baroness, Lady Greengross, that we have already embarked on a joint programme with local government to implement the care and support reforms and that awareness raising will be an important part of this. The department will co-ordinate the messages to ensure that a simple, coherent campaign can be delivered nationally and locally. We are engaging with the voluntary sector, care providers and the financial services industry to make sure that we can all play an effective part in communicating these reforms. The noble Baroness, Lady Greengross, emphasised the need for stability in the sector in the way these reforms are implemented. If we combine our efforts and maintain cross-party support for these reforms—which I hope and believe we can—we can ensure that this happens.

We want to see products developed and in that process we need to consider whether this could be aided by regulatory change, which was also mentioned by the noble Lord, Lord Lipsey. The department has already opened up the lines of communication between industry, the Treasury and the Financial Conduct Authority to explore this issue further.

As to being realistic about what we should expect, I want to be clear that I do not expect a big bang moment where financial services companies across the country release hundreds of new products. I want to see a sustainable market develop, with products which are designed to meet the demands of customers. These developments will be incremental and are likely to take some time. That is emphasised in the ABI report, which states that it will take a much longer period of time before younger people are encouraged to purchase care products. It also identifies products that could be adapted and brought to market in the short term. It suggests that the first step, the quick wins, would be to adapt existing products such as pension annuities, health insurance and, as my noble friend Lady Gardner said, equity release, to name but a few. The recent announcements made in January by a number of leading firms confirm that the industry is beginning to develop its offer for the market. That is a positive development.

The noble Baroness, Lady Greengross, and the noble Lord, Lord Hunt, asked about the timetable for the guidance. We will consult on the draft regulations and guidance for the April 2015 reforms in the spring of this year. We intend to consult on the draft regulations and guidance for the April 2016 reforms—that is, the cap on care costs—in the autumn of this year. We have committed to do this to make sure that they get the scrutiny they require and to give local authorities enough lead-in time properly to prepare for implementation.

My noble friend Lady Brinton asked how people could obtain information and advice about the adequacy of the products they were being offered. There is a separation of roles here. It should be the role of government to raise the levels of awareness of how care funding works and encourage people to plan and prepare—I have already talked about that—but it should not be for government to recommend or give a gold seal to any financial product. Advice is regulated precisely because whether something works or is appropriate is down to individual circumstances. That is why the noble Lord, Lord Lipsey, emphasised the point around the expertise of SOLLA representatives, for example.

The noble Baroness, Lady Greengross, suggested that the eligibility criteria for deferred payments should be national. Eligibility criteria for deferred payments will be in national regulations to ensure that there is protection for those people who face having to sell their homes in their lifetime to pay for care—that is the minimum offer. Local authorities, however, will have discretion to be more generous than the minimum offer, and we will consult on all the draft regulations and guidance that are to come in next year, as I have mentioned, in the spring of this year.

The noble Lord, Lord Hunt, returned us to the issue of the cap on care costs and suggested that, in reality, people would find themselves paying more. I would not seek to argue with the points that he and the noble Lord, Lord Lipsey, made. It is a difficult issue. We want to extend state support for social care to tens of thousands of people who get little or nothing under the current system and the Care Bill establishes a legal framework to enable this. We would like to be able to set a lower cap, which may well be possible in the future, but we also need to live within the broader economic constraints on public spending that we currently face. It is a matter of finding that balance at the current time. We have committed to reviewing this question every five years to ensure that we continue to get that balance right.

I am optimistic that the financial services industry will step up to the plate and play a role in helping people to plan for their care costs. We will encourage it to do so. Our continuing work with the industry is a key pillar in our efforts to support individuals in the new partnership recommended by the Dilnot commission. There is still a long way to travel but the first stirrings of growth are beginning to show.

House adjourned at 8.23 pm.