Andrew Dilnot has warned that Government inaction over his commission’s recommendations to reform care funding would result in great political costs.
The Commission on Funding of Care and Support’s recommendations include a £35,000 cap on individual lifetime contributions to adult social care costs and a rise in the means-tested threshold from £23,250 to £100,000. The cap does not cover so-called hotel costs of accommodation and food but the commission has called for a standard limit on general living costs in care of £7,000-£10,000 a year.
Politicians from the three major parties support the need for reform but the Government is said to have balked at the £1.7bn cost of the proposals.
Commission chairman Dilnot believes there is enough political will and momentum to see through reform.
He says: “We were not a secret civil service review. We were a pre-announced independent commission set up by the Government and it was the Government that said it wanted to do this.
“It will be extremely uncomfortable for the whole political world if nothing happens. The political costs of doing nothing would be very great indeed, which is why I think after this period of discussion there is going to be a white paper.”
Health Secretary Andrew Lansley has said the Government will publish a white paper next spring. The commission believes its reforms can be implemented by 2014.
Dilnot says: “The Government has made a public commitment to it, so it has made it an electoral issue. Any change is always challenging but I think it would be very hard to back away now.
“We are talking something that will cost 0.25 per cent of total public spending. I know things are very tight but by the time any money is spent on this we will be two or three years down the track. That is not a scale of funding that makes this difficult in the long run.”
Dilnot believes new financial services products to help plan for funding care needs are likely to emerge from the report. He suggests these will be based on existing assets, such as improvements and extensions to equity-release products and innovations such as disability insurance that would work in a similar way to critical-illness cover.
In particular, he is keen to see the development of a market for disability-linked annuities. Income from an otherwise flat annuity would be reduced by around 10 per cent but would then double or treble at the point of developing a care need. Dilnot says: “Those products look attractive because you only have to forego a small part of the annuity but it gives a really dramatic increase in your income if you need care.
“By and large, people spend their working lives building up assets and not always with a very clear idea of what they want to use them for. Our sense is we need people to use the assets they accumulate to plan and prepare for all aspects of their older life.”
The commission wants the Government to clarify tax treatment of disability-linked annuities to say they are allowed under current pension taxation rules.
It has also recommended the Government to invest in a major care information and advice strategy, with a statutory duty on local authorities to provide people with information and advice about care funding and services in their area.
Dilnot says the provision of care advice needs to improve, particularly if the proposals are implemented, so people are aware of the changes made to the funding system.
He says: “For people to make good choices, they are going to need an awful lot of help with making those decisions. There is a gap in terms of people knowing what to do. New initiatives rely on there being good information and advice so I think we need better information and advice both on the choices people make about what form of care will work best for them and what types of financial products might help them.”