Reform of social care has been in the news a lot in recent times, and not just because of Covid patient-dumping by the NHS into state and privately funded care homes. It is moving up the political agenda, and the Government has supposedly been testing the waters for a hike in National Insurance Contributions to pay for reforms. Hopefully though, ideas for a social insurance approach (favoured by some IEA authors, for example, but opposed by the Nuffield Foundation, amongst others) might still win out over a possible clone of a National Health Service, the bureaucratic arm of which, along with its supporting prop of Public Health England, did not particularly distinguish itself during the recent Covid crisis.

An element sure to be invoked in any solution is the threshold of the state’s contribution to the care costs of the relatively wealthy. If the selected approach is based on the pooled insurance model it is likely that the wealthy will still need to contribute when care costs go beyond some limit. Equally, open ended funding in an NHS-type model will prove unacceptable when the cared-for retains valuable assets, mostly these days in the form of property.

The Dilnot Commission of 2010 originally suggested the means-tested threshold, above which people are liable for their full care costs, should be increased to £100,000. More recently, a report for Public Policy Projects suggested this sort of cap was inherently unfair. The wide disparities in housing wealth would mean that the Dilnot proposal has a different incidence on lifetime wealth in areas of low property prices than it does, say, in leafy Surrey. Instead, the PPP proposed a threshold based on a percentage of personal assets. But again, there might be an inherent unfairness. Housing wealth, the bulk of personal wealth, is the outcome of a fickle market in which local demand and supply confronts varying constraints of a localised planning system. The outcome is that much wealth accumulation is in the form of an economic rent and it is that which should be the focus for determining the size of personal contributions.

Most basic data required for such an approach is readily available in Land Registry records (property purchase price) and ONS statistics on price indexation; the only adjustment needed is to allow for any post-purchase spending on improvements that add to the property’s value. But this tweak apart, it is the current value of the property minus the indexed purchase price that defines the economic rent, and it is this rent that should define the property component of an individual’s assets when it comes to assessing whether the cared-for should contribute to care costs.