The government needs to provide an additional £8bn a year to solve the adult care funding crisis, a cross-party committee of peers has proposed.
The Lords Economic Affairs committee stated that to address the pressure facing carers and local authorities the government will need to provide £8bn a year in additional funding, rising in the coming years as the population with care needs continues to grow.
In their report on social care funding, published today (July 4), the peers also suggested introducing an NHS-based system of free personal care so that those with long-term care needs can receive help with their daily activities.
Even though this may be more expensive than some alternatives, costing about £7bn a year, it could reduce demand for residential and health care by encouraging people to seek home care, they suggested.
The report stated this should be introduced over the next five years so that it is available to everyone by 2025/26.
The free personal care would include help with washing, dressing or cooking however those in care homes would still pay for their accommodation and assistance with less critical needs such as housework or shopping.
In Scotland, free personal care was introduced in 2002 for those aged over 65 who are assessed by their local authority as needing it.
Lord Forsyth of Drumlean, chairman of the Economic Affairs committee, said: "Fixing underfunding is not difficult. The government needs to spend £8bn now to return quality and access in the system to an acceptable standard.
"Fixing unfairness is more complicated, but the government has ducked the question for too long."
He added: "We think that change should include the introduction of free personal care, ensuring those with critical needs can receive help with essential daily activities like washing, dressing and cooking.
"Our recommendations will cost money, but social care should be a public spending priority. By 2023/24, the NHS funding will have increased by £20.5bn per year. This is more than the entirety of local authority adult social care expenditure."
The committee also addressed the perceived unfairness surrounding people’s entitlement to public funding.
For example, someone with dementia can pay hundreds of thousands of pounds for their care, while someone with cancer receives it for free.
The committee called for this entitlement to be based on the level of need for social care rather than the diagnosis of an illness.
Rob Yuille, head of long-term savings policy at the Association of British Insurers, said any reform made by government must be well-thought out.
He said: "We urge the government to consider the interaction between the state and private provision, whilst ensuring that any new or reformed system is very clear, increases awareness and minimises confusion by clearly setting out what each care user is responsible for funding themselves."
The government, which is currently working on a green paper on social care, has already said the future model of social care won’t be solely funded by taxpayers.
The publication of this paper was originally expected in the summer but has faced several delays and the government has said it will become public "in due course".
Several solutions for the care funding problem are said to be on the table, including the ‘Care Isa’ – a capped savings product, exempt from inheritance tax – and a 'care pension', which mixes drawdown and care insurance.
The Lords committee suggested the government should publish a white paper rather than a green paper, with clear proposals for change now.
A white paper is more authoritative than a green paper, and is seen as a statement of government policy rather than a first step towards legislation.
As part of the Centre for Policy Studies’ social care funding review, published on April 29, MP Damian Green suggested people should be able to purchase a care supplement, which would be similar to an annuity or insurance policy, to ensure individuals have funds for more expensive care if needed in the future.
This money would come from individuals’ existing pension pots, lifetime savings or via equity withdrawal from people’s homes and would act as a top up to government funded state care.
Kate Smith, head of pensions at Aegon said it was surprising that the Lords did not consider an insurance product for care funding.
She said: "It is interesting that the Lords have ruled out an insurance based system, which would be a difficult sell to individuals who will not know in advance whether such a policy will provide them with value.
"While the report adds to the debate as to how to tackle this thorny and politically difficult issue, what is really needed is a firm decision from government which provides people with certainty about what they might be expected to pay towards later life care.
"Without this it is difficult for people to plan adequately for their retirement and people are left with a big unknown hanging over them as to what their savings might need to be used for and whether they will be able to leave an inheritance to their families."
amy.austin@ft.com
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