Inheritance levy to fund social care being considered by ministers

Radical proposals for a £20,000 compulsory inheritance levy to help pay for Gordon Brown’s social care plans may be endorsed by the government before the general election.

The health secretary, Andy Burnham, believes he may get the backing for a compulsory plan from Downing Street, but influential cabinet members are still agonising over whether to be explicit about it on the eve of the poll. They fear the proposal may prove to be too bold to sell to the electorate in the heated weeks before an election.

Some cabinet members close to Brown back the proposals, but believe the government may have cold feet, deferring a decision until after the election in the same way that politically difficult decisions on the future funding of higher education have been delayed until a post-election review.

One cabinet member accepted the decision that had to be made on social care was probably the most difficult the government had to make ahead of the election, including the budget.

The inheritance levy, thought to be £20,000, would be deducted from the estates of older people when they die, replacing a system that forces many pensioners to sell their family homes to fund nursing home bills. Burnham believes the lesson of Barack Obama’s failure to win wider support for his healthcare reforms is that he tinkered around the edges, rather than being bold.

He has been discussing his ideas with cabinet members in recent weeks to test whether they are willing to take the risk of a compulsory scheme ahead of the election.

Burnham is hopeful that he has the support of Lord Mandelson, the business secretary and the man who will oversee the party’s election strategy. Mandelson has been arguing that the party needs to be seen to have big ideas. The compulsory scheme has the support of Help the Aged, and other pressure groups.

The political danger behind the compulsory scheme is that the child of a parent that needed little expensive social care in their old age would still see the levy being imposed on their parent’s estate.

It is also hard, cabinet members recognise, to persuade voters that they would have been worse off under the status quo. It is argued that those with more than £22,250 in assets are currenlty forced to pay for their care themselves by selling their homes or using up planned inheritance funds.

Cabinet members recognise it is not possible to raise national insurance further, even in a disguised form.

A summer green paper ruled out tax-funded support for the elderly because “it places a heavy burden on people of working age”. Downing Street is understood to favour the idea of spreading the cost of an ageing population more fairly through a levy and ensuring that millions of Britons have something left to pass on to their children.

In a bid to soften up the electorate, Brown said in a speech to the Kings Fund health thinktank that “caring for older people well is the hallmark of a civilised society” and that his ambitions were to go beyond the current personal care at home bill going through the House of Lords.

He said “[We need] to shift decisively from a model which sees too many people in hospital or residential care, and too little support and care at home; to one which intervenes early to keep people active and healthy wherever possible – and provides the care to enable them to live with dignity – and far longer – in their own homes.”

A report from Birmingham University, commissioned by the Department of Health, warned that the real costs of adult social care would double in the next two decades if the system remained unchanged.

Its author, Prof Jon Glasby, said that there had to be a big change in thinking “so that spending on social care is not seen as dead money. We can save money with this kind of investment.”

Doing nothing to change the way things work “is not a viable option”, according to Glasby. Currently nursing home bills for the poorest are met by the state, but anyone with savings above £22,250 pays for long-term care, with nursing homes costing an average of £600 a week. There are huge variations in what the councils provide.

The prime minister claimed that “with less need for acute admission, more people managing their own conditions in their own homes, fewer emergencies – we can save more than £2bn over the next three years all of which can be reinvested.”

He added that, too often, elderly people are admitted to hospital and “linger” there because the nursing care, rehabilitation, and simple domestic support they need to get back on their feet at home are not available.

Brown said a forthcoming white paper would also make clearer how new services would be funded.

The government has placed the overall cost of the personal care bill at £670m a year, but a recent Adass survey put the possible cost at over £1bn a year.

Jenny Owen, president of the Association of Directors of Adult Social Services, said she was “encouraged by the prime minister’s speech (but) on personal care we are still concerned it’s underfunded.”

Critics in the upper house have also taken exception to the government proposals. Lord Turnbull of Enfield, a former cabinet secretary for Tony Blair, said the current bill would not “help secure resources for those with greatest need”. “It will support those who are frail but robust enough to stay at home but would not help those who need to go into a care home,” said Lord Turnbull.

The former top civil servant, who sits as a crossbencher, added that his own 94-year-old mother who had to go to a care home would “get nothing until she had paid for (care) by bankrupting herself”.

Health economists too were critical of the government’s proposals. Richard Humphries, senior fellow at the King’s fund, agreed with Lord Turnbull’s anaysis that the government was currently offering “free care for the few not the many”.

“The prime minister needs to say that there has to be a realistic commitment to more money and that the social care system should be redesigned from top to bottom. Until then we are not getting anywhere”.