FSC0074 - Evidence on Long term funding of adult social care

Written evidence submitted by Mr Trevor Durham [FSC 074]

I am a Chartered Financial Planner specialising in care fees. I am an Accredited Later Life Adviser with SOLLA and also a Symponia member. I regularly practice both in South Wales (where of course the health and social care system is devolved), but also in and around Bristol, so have experience of both the English and Welsh systems.

I am giving my viewpoint on ‘How to fund social care sustainably for the long term (beyond 2020)’.

I am employed by national financial advice firm LEBC Group, however I am responding in my own personal capacity.

My thoughts are:

The current system for paying for social care, whereby those with no or little assets receive public funding but those with assets over a certain level have to pay for themselves, is broadly fair.

I did not and do not support the idea of a ‘cap’ on the amount that a person could be asked to pay for care in their lifetime. If a person is still in care, and there are still assets, then they should still be paying.

Any ‘cap’ on care costs is of little or no benefit to a caree themselves. Usually such a person, if in residential care, will stay in care for the rest of their lives. Often, they no longer have the capacity to fully understand and appreciate their situation.

The only benefit of such a ‘cap’ is to the caree’s family. In essence, then, a ‘cap’ on care costs would mean that public money (i.e. that extra funding that would be paid to fund the care of someone who had reached the ‘cap’) were being spent to protect the inheritance of the family. In my view, this is a very poor way to spend taxpayer’s money, especially given that taxes are paid by everyone (including those with no such inheritance to be protected for themselves).

I further believe that the suggestion mooted in the election campaign that someone receiving Domiciliary Care, and going through a means test, should have the value of their house taken into account. To me, it would seem grossly unfair that someone with, say, a million pounds of property wealth, should be able to call on their Local Authority to pay their care fees for them. There is a vast amount of property wealth – over £1trillion as I understand it – held in the UK by older people, who also often have very generous Defined Benefit pensions. If more money is needed nationally to fund the care system – and, of course, it is – then it is this wealth that should be the primary source, regardless of the inevitable headlines from the right wing press. There is, however, a need to reform the way that Equity Release and Universal Deferred Payment Arrangements work to make it viable for ER to be used more widely (see below).

It is important, however, that the Upper Capital Limit be raised at a reasonable rate. It has barely risen for some time, and not at all since 2011. This very much has the appearance of a ‘stealth tax’. I would suggest that the UK Govt look at what the Welsh Govt has done/is doing recently, and consider an increase to £40,000 or £50,000 in the next few years, plus further increases in line with inflation. Increasing the Upper Capital Limit is fairer than having an overall ‘cap’, because it is saying ‘everyone can protect the first £xxx of their money’, instead of saying ‘once you have spent £xxx then you can protect the rest of your money no matter how much you have’.

In terms of a possible merger of NHS and Social Care services, I believe this would be problematic. The current divide between medical and social care is, I believe, a fair one. More importantly, with an ever ageing population, the UK simply couldn’t countenance any more towards a fully funded ‘National Care Service’ (and the effect of such a system, again, would be that taxpayers money ‘of the many’ would be being spent to protect the inheritance ‘of the view’, which would not be fair).

I can see an argument from moving responsibility to providing Social Care from Local Authorities to some kind of new national body – a ‘National Care Service’ if you like. This would help to end the variance that exists between different towns/ cities/ counties. It would also held save younger people who happen to live in areas with high elderly populations from the extra tax cost of having to provide social care services for a large number of people. However, this National Care Service should not mean extra public funding – carees and their families would still be paying if they had assets above a certain level, it would just be being administered nationally instead of locally.

If Social Care responsibilities are to be left with Local Authorities, then the rules restricting Council Tax increases need to be relaxed or removed altogether. It is simply absurd to expect councils to pay for ever spiralling social care costs, whilst their ability to raise funds is restricted. As has been seen in Northampton, this is forcing LAs to spend a higher and higher proportion of their available budgets on social care. I would suggest that we do not want Local Authorities to become, in the future, little more that Local Social Care Authorities.

Again, however, pooling the tax/costs of social care across England, rather than by Local Authorities, would be fairer, and would allow LAs to concentrate on other services.

Other suggested changes for the Paying for Care system:

Remove the Lower Capital Limit and the concept of Tariff Income, as the Welsh Govt has done. The LCL and Tariff Income add unnecessary complexity to the system, and it is such a tiny band anyway, I seriously wonder why the DOH bothers with it?

Make it easier for someone to choose Equity Release as an option for paying for care. Speaking as an adviser working both in the Care Fees field and in Equity Release, it is ongoingly disappointing to me that the two do not really mix. Consider – someone receiving Domiciliary Care and needing to fund it partly/wholly may consider a Lifetime Mortgage to (help) fund that care. However, if the same person later moves into Residential Care (and it is not at all uncommon for someone to start with Dom Care and to later move into Resi Care), they are in effect precluded from accessing a Universal Deferred Payment Arrangement at that point. This is because:

each of a LTM and a UDPA requires a sole and first legal charge over the property
a UDPA can only be used to defer care costs – an existing debt cannot be rolled over into a UDPA arrangement
to access a UDPA, then, when moving into Resi Care, a caree would have to repay their Lifetime Mortage – however, this is something that is only likely to be possible for them if they sell their house!
furthermore, it is similarly impossible for someone with a Lifetime Mortgage to retain it when moving into Resi Care and to use it (and further release from it) to fund their care fees. This is because it is a standard clause for Lifetime Mortgages that they need to be repaid when the person moves into Residential Care.

Put together, these contradictions simply do not make sense.

The solutions for this would either be:

To allow existing debts to be rolled over into a UDPA when it is incepted. I don’t see any particular reason why this cannot be done, but I would say that Local Authorities need to be allowed to charge commercial rates of interest and must not be limited to charging the current “market gilt rates + 0.15%” (which I am sure will be costing LAs significantly over time).

To make it possible (indeed to make it compulsory for lenders) for someone to both retain their Lifetime Mortgage when they move into Residential Care, and to then either:

borrow more from it, or
simultaneously enter into a UDPA (and hold both)

This would require thought as to who would hold First Legal Charge and who would hold Second Legal Charge, or whether First Legal Charge could somehow be shared between the Local Authority and the Lifetime Mortgage lender.

The market for care fees financial products is extremely limited, with just two providers currently active, AVIVA and Just. I am aware that others have said that they won’t enter the market unless a ‘cap’ is introduced. I reiterate my view that it should not be. I would, suggest, that other incentives be considered to encourage insurance companies to enter this marketplace. Perhaps some kind of tax break for the insurer? You may even consider a ‘carrot and stick’ approach. For example, ‘Insurance Company X, you may only operate in the Enhanced Pension Annuity market if you also agree to operate in the Immediate Needs Annuity market.

Lastly, with regard to the suggested lack of cap and the suggested removal property disregard for Dom Care, I believe that public support may be more forthcoming for this if the cost of not acting is calculated and is spelled out. For example, “general public, we could choose not to take this route, however if we do not, we will have to add 2p to the basic rate of tax instead (or £200 to the average council tax bill), and probably more later, just to pay for care. Would you prefer that we did that?)”

I hope that the above is helpful. I would be happy to discuss this further with the committee if that would help also.

March 2018