Social Care

Lord Lipsey Excerpts

Thursday 28th October 2021 Grand Committee

Asked by

[Lord Lipsey]

To ask Her Majesty’s Government what assessment they have made of the possible role of the private sector in helping individuals pay for social care.

[Lord Lipsey (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as the unpaid president of SOLLA, the Society of Later Life Advisers.

I think these proceedings are a bit rum. A Conservative Government are proposing reforms to help people to pay for care: the cap and the revised means test. They say that these should be entirely funded by the state. And here is a Labour Peer saying, “No, you have got the emphasis wrong, and you should be looking at what the private sector can do to solve the problem without recourse to public funds.” Let me try to resolve that paradox.

In a nutshell, the problem is that roughly half of those needing care have to pay for some or all of it themselves. When it is just a few months or years for people with some wealth, that does not provide much of a problem. But a minority of the half—one in 10 perhaps—go on living for many years in a care home. That means that they exhaust all but £20,000 or so of their resources. Their children may be deprived of their inheritance. As Andrew Dilnot argued in his excellent 2011 report, these people need some form of insurance. The private sector will not provide that insurance. There has never been and never will be any insurance policy you can buy in advance to pay for your care. Tory voters will be terribly affected by this—those we used to call middle England and in the south of England—so of course the Government want to help out.

There are two central flaws in the Government’s approach. First, the insurance that will be provided by the government cap is not at all adequate. I will not repeat what I said in the care debate the other day, but it will be seven years at least before anyone benefits from it and I think it will only pay one-third or one-quarter of costs at the most. We can debate that another time. Secondly, and more importantly to me, such little support as the cap provides will not go to those most in need. It will go to the better off. They are the ones with lots of assets and therefore debarred from means-tested help, and they will tend to live longer since being wealthy is a key to a long life. The Government’s policy, I am afraid, represents a levelling down: taking from less well-off national insurance payers and giving the proceeds to the better off and their children.

Worse still, by spending money on helping the rich in this way, the Government give away money that could be deployed on a more important task: improving our wholly inadequate care services. As the population ages, adding to demand, supply has got worse and worse as local authorities are cut back. The quality of care is not by any means always adequate. If the Minister will forgive me in his presence, I speak the language of Nye Bevan:

“The language of priorities is the religion of Socialism”.


For me, providing more care takes greater priority than paying for care for the rich.

Can the private sector step in? It is true that the financial services sector has been chary of this space. I mentioned already that it does not provide long-term care insurance. Its excuse for this is risk: what if people live much longer than expected and therefore it has to pay out more? If you think about it for a minute, this is palpable nonsense, because these same insurance companies are going around the place desperately trying to sell life insurance policies, which are subject to precisely the same risks as apply to long-term care policies. Having been around these people for a long time, I am afraid that the real reason is a simple one: it is very hard to sell long-term care policies. Most people out there are pitifully ignorant about care. They may know about pensions, but they do not know about care. About a third of the population still think that the state will pay for it in full. Even those who understand see it as a problem that is far in the future, to be dealt with when the time comes. Persuading them to cough up now for a need that they may well never have is hard work, even for the most seductive of financial services salespeople.

However—a big however—there are a number of purely private financial products which financial services companies offer that can help, and there could be more. A major one is equity release. With house prices having soared, many people have a large chunk of money which they can access through an equity release to pay for their care. They do not have to spend that money on it. They can take out a point-of-use care product when their need arises. Then there is the immediate care cost annuity: you take it out when you go into a home and your costs escalate, and it will pay out for as long as you live. If you live for 10 years, it will pay out for 10 years. If you live for less time, you will not do so well. There are subtle variants on this—for example, policies which refund your premium if you die within a few months of taking the policy out, because some people are frightened that they might be paying something for nothing. For many, the future may lie with a cheaper and more attractive policy: a deferred annuity policy. When you first go into care you pay for yourself, but as you are in care for a longer period—a specified number of years—the policy will step in to pay for the rest of it. That provides insurance as a sort of privately funded cap. These are not the only possibilities. An ingenious correspondent suggested to me that there could be a product whereby you temporarily give your home to a housing association. It will then pay your care fees out of the rent.

These products are making progress but from a very low base. For example, equity release sales have nearly doubled since 2016. The number of firms offering care annuities has gone from two to four. It is growing, but slowly. How do we encourage it to grow? I am SOLLA president because people do not know much about care. When they do find out, they are disinclined to do much about it. There is a role here for more publicity, but the most important requirement is for better advice for more people. I do not just mean publicly provided advice. There is no substitute for an independent financial services adviser—dare I say it, a SOLLA-accredited one. It is very important that we increase the availability of that advice and do not just leave people to go to the citizens advice bureaux. Great organisation though it is, Citizens Advice is not necessarily capable of dealing with these very complicated issues.

We are in a crisis on care, and we are heading towards disaster. We have one group of older people who cannot get care of adequate quality, and their families are up in arms at this total failure of the Government. We have another group—smaller but much more used to getting their way—who want their inheritances protected for their children, who will discover, I am afraid, that Johnson’s cap is not an answer. They are likely to lose the greater part of their assets paying for care and will not be able to fulfil their last remaining ambition, which is to see their children right when they die.

The private sector cannot do everything to put this right. I am not saying that it can but, properly promoted and properly advised, private financial products can do much to take the sting out of the care cost fiasco. I hope that today the Minister will show some sign that he and his colleagues are beginning to wake up to the serious problem that was left after their proposals came out.