MPs from two Parliamentary committees are calling for the government to introduce a new tax for people over 40 to fund social care.
The Housing, Communities and Local Government and the Health and Social Care committees today (27 June) published a report which suggests the introduction of a ‘Social Care Premium’, either as an additional element of National Insurance, or with the premium paid into dedicated not-for-profit social insurance fund that people would be confident could only be used for social care.
To ensure fairness between the generations, the premium should only be paid by those aged over 40 and extended to those over the age of 65, with the money being held in an “independent, dedicated and audited fund to help gain public trust and acceptance for the measure,” the MPs argued.
The Parliamentary committees said individuals and employers should pay a new contribution into a dedicated fund, “set aside to help pay for the growing demand for adult social care and implement funding reforms”.
They also noted the current system isn’t “fit to respond to the demographic trends of the future”.
Back in December, the government confirmed that the proposed £72,500 cap on social care would be scrapped.
Prime minister Theresa May’s predecessor, David Cameron, had promised to bring in an upper limit on the amount people must pay towards their own care, following recommendations of the Dilnot commission in 2011.
Instead, the government said that there would be a process of "initial engagement over the coming months" to define the long-term reforms, which will be set out in a green paper which was due to be published this summer.
However, Jeremy Hunt, secretary of state for Health and Social Care, revealed earlier this month that the document won’t be published until the autumn.
Back in May, the prime minister was forced to say the Conservative government would set an “absolute limit” on the amount people pay for social care after her original plans for funding social care, unveiled as part of the Conservative party general election manifesto, were dubbed "a dementia tax".
After three days of mounting political criticism of her social care reforms Mrs May bowed to warnings from Tory candidates that it was hitting the party hard on the doorstep.
According to research from Just Group, round 3.8m people are delaying making financial plans for residential care until a new proposal on this area is introduced.
The report by the cross-party Committees describes the social care system as "under very great and unsustainable strain".
The MPs argued there is an “urgent need to plug a funding gap estimated at up to £2.5bn in the next financial year, before introducing wider funding reforms at both a local and national level to raise extra revenue with a long-term aspiration of providing social care free at the point of delivery”.
Labour MP Clive Betts, chair of the Housing, Communities and Local Government committee, said: “We heard during the inquiry that people would be willing to pay more if there was an absolute guarantee that the extra money would go on social care.
“Given the huge funding gulf, the government should now take the opportunity to build both a political and public consensus around the need for a new ‘Social Care Premium’ to secure a fair and sustainable system in the long-term.”
Conservative MP Sarah Wollaston, chair of the Health and Social Care committee, argued there cannot be any more delays in “finding a fair and sustainable settlement for social care”.
She said: “Too many people are being left without the care and support they need and it is time for decisions to be made about how the costs are shared.”
The committees recommend that an independent body should be tasked with modelling requirements and providing the government with two-yearly forecasts.
Further funding reforms outlined in the report include levying an extra amount of inheritance tax on estates valued above a certain threshold and capped at a percentage of the total value.
This would enable the pooling of risk and prevent catastrophic costs to those receiving long term care, the MPs said.
Alistair McQueen, head of savings and retirement at Aviva, noted that like the NHS, the UK’s social care system is also celebrating its 70th birthday in 2018.
He said: “Unlike the NHS, this government - and its predecessors - have been slow to come forward with actions to address its funding crisis.
“There have been 12 government green papers over the past 20 years, yet decisive action has been absent. Other, more immediate, political pressures have seized the attention.
“Today’s report shines another light on the well-illuminated problem of social care. Many lights are on, but it remains to be seen if politicians and the government are yet at home.”
Nathan Long, senior pension analyst at Hargreaves Lansdown, argued the issue of “funding later life care is as monumental as that of having enough money saved for retirement”.
He said: “The key difference is that pensions have been tackled, at least in part, with the introduction of auto-enrolment.
“Social care is crying out for a similarly effective policy intervention, but with increasing awareness of wealth gaps opening up between the old and young, fixing the problems remains hugely challenging.
“Life begins at 40, but starting to tax specifically at age 40 seems fairly arbitrary. Those doing the right thing and saving for their future should make sure they do so tax efficiently. Money already stowed away in Isas and pensions still look to be a robust shelter from the winds of political change.”
maria.espadinha@ft.com
