A cruel choice for politicians – how to fund care for the elderly
In 2011, Andrew Dilnot recommended that a cap be placed on the amount retired people with assets over a given threshold would have to pay towards care. He suggested £35,000 with an estimated cost of at least £1.7 billion as the taxpayer picked up care costs above that. Initially the government seemed to have rejected this but now it appears they will do this, but with a higher cap (£50,000–70,000) and a higher threshold, leaving the total bill about the same.
So, how to pay? One suggestion, floated by CentreForum, is to means test Winter Fuel Allowance to save £1.5 billion. This of course has provoked furious responses from the recipients, who are typically also opposed to having to cash in their assets over a certain limit to fund care.
The basic problem is simple. We have an ageing population and a welfare system that, contrary to popular opinion, is not based on a contributory principle where payment in of tax gives entitlement to benefits. Rather, the current working population pays through taxation for a range of payments to several groups, including the elderly. As the relative numbers of older people increase and the costs of care increase so the charge to the working taxpayer must increase unless older people also make a contribution.
The obvious way to do this, in the case of social care, is to use savings and assets above a certain limit, built up over a working life, to offset those costs. Why should this be thought morally questionable? The point of investing in a house or savings should be precisely to release them as cash to meet the needs of old age. Moreover doing this gives people incentives to take actions that they should take for other reasons such as downsizing their accommodation and managing their savings.
The real problem is that for some people those costs are containable while for others (about 10%) they are large – and nobody can be sure if they will fall into that 10%. The long-term solution should be some kind of collective insurance or risk pooling either public or private. However, given that politicians did not set such a system up thirty or forty years ago (through ducking tough decisions) we now have the choice of asking the current generation of retirees to make a contribution (as at present) or dividing that cost between some retirees and the general taxpaying population. Somebody’s ox will be gored, hence the unhappiness of the current generation of politicians.