Peace for the World

Peace for the World
First democratic leader of Justice the Godfather of the Sri Lankan Tamil Struggle: Honourable Samuel James Veluppillai Chelvanayakam

Thursday, June 1, 2017

What could the ‘dementia tax’ mean for your future?

By -1 JUN 2017

The Tories have come under fire after announcing reforms to social care policy in their manifesto last month.

In particular, they drew criticism for proposals to change the rules on how elderly people pay for their own care in later life. After just four days, the Tories were forced to issue a “clarification” to the policy, which itself was described as “chaotic” and “confusing”.

But amid the media furore, you might have missed the detail of the policy and the subsequent u-turn. What could it mean for you?

Cuts to social care funding

The Department of Health defines social care as “extra care or support – practical or emotional – to lead an active life and do the everyday things that many of us take for granted”. Recently, the debate has focused on funding for elderly social care.

According to the Institute for Fiscal Studies, local authorities have cut spending on adult social care by an average of 11 per cent across England since 2009-10. In the north-east and London, cuts have been even more severe, at around 18 per cent in those areas. The King’s Funddescribes the financial outlook for the next five years as “bleak”.

The amount of money spent on social care is for local councils to decide. But the IFS points out that Tory cuts to local government spending are the reason councils have had to reduce spending on social care.

How do people fund their own care?

Under the current system, if you’re in a care home, your local council will pay for your care if the combined value of your house and your savings is less than £23,250.

The calculation is different if you’re cared for in your own home and receiving so-called “domiciliary care”. In those cases, councils do not include the value of your house when they’re assessing your ability to pay. They only look at how much you have in savings.

Whether you’re at home or in a home, once you hit that £23,250 “capital” threshold, you have to start contributing to the cost of your care. These contributions are not taken directly. Instead, the care costs are drawn down from the value of your house and your savings.

But councils can’t just keep depleting the value of your assets until they are worthless. They have to leave you with a minimum of £23,250 to your name.

What did the Tories originally say?

The Tories’ original manifesto announcement gives with one hand and takes with the other.

Their giving hand offers to raise the minimum amount that councils have to leave you with to £100,000. That more than quadruples the amount of money you can pass on to your kids.

But their taking hand wants to change the arrangements for funding care in your own home. When councils decide whether you can afford to pay for your care in your own home, the Tories want them to include the value of your house as part of the calculation.

The Tories say this is about bringing the policies for funding domiciliary care in line with arrangements for care in a home. It certainly does that, but will mean more people have to pay for their late-life care.

How many more people would need to pay for care?

There aren’t any official figures on how many more people would have to pay for care, but we can look at the data we have to make a rough estimate.

According to the UK Homecare Association, 873,500 people were cared for at home in 2014-15. 65 per cent of pensioners own their own home. So on that basis we can assume that around half a million people who need domiciliary care will be home owners.

We don’t know exactly how many of those home owners will have assets worth more than the £100,000 threshold. But we do know that the average UK house price is £215,848, which would mean the average homeowner having to contribute to their own care costs.

So our best guess, based on the data available, is that the number of people who would have to pay for their own care could be in the hundreds of thousands.
These are just our estimates, and we await further research.

What was the u-turn about and does it change anything?

There was a major backlash after the Tory manifesto announced the social care policy, forcing the party to rush out a “clarifying” statement.

The u-turn, to describe it more accurately, saw the Tories try to mitigate the effects of the original proposal by promising to introduce a cap on the total amount of money that someone would have to pay for care.

But crucially, they won’t put a number on the total amount. Instead, they’ve said they’ll launch a public consultation if they win the election to decide at what level to set the cap. In theory, that should mean that you will know the maximum you’ll ever have to pay.

Without a hard figure, it’s difficult to predict the effect on pensioners of the u-turn.