The Government has confirmed plans to introduce a £75,000 cap on long-term care costs will be partly funded by increased employer national insurance contributions as a result of the abolition of contracting-out.
This afternoon, health secretary Jeremy Hunt told Parliament the new cap – which does not include accommodation or food costs – will be introduced in April 2017.
The Government will also increase the asset threshold above which people do not receive means-tested help from the Government from £23,250 to £123,000.
The Department of Health says the reforms – which will cost the Treasury an extra £1bn a year – will be partly funded by extending the freeze on the inheritance tax threshold at £325,000, or up to £650,000 for couples, by three years from 2015/16.
The rest of the money will come from the extra 3.4 per cent public and private sector employer NI contributions which will flow to the Treasury when contracting-out is abolished as a result of the introduction of a single-tier state pension for future retirees.
It is not yet clear how much of the contracting-out cash will be spent on the care reforms.
Hunt says: “This is a watershed moment for our country. For too long, the issue of social care has been ducked by successive Governments, leading to an unfair system that has seen people selling their homes and losing nearly everything they’ve worked for to pay for their care. With us, that unfairness is ending.
“These historic reforms will give everyone the protection they want in their old age and save the family home.
“And they prove once again that despite these tough economic times, this Government is determined to get behind everyone who has worked hard and done the right thing and aspires to a better life for themselves and their children.”
Responding for Labour, shadow health secretary Andy Burnham describes the proposals as “a plan for the few, not the many” and says they “fail the fairness test”.
He also questions whether the level of the cap, which is higher than the Dilnot Commission originally proposed, will stimulate a market for long-term care insurance.
“This is a step forward, but it is a faltering one,” he says.