Residential care will be ‘free’ under Labour plan

Elderly people who have been in residential care for two years will have the costs paid for the rest of their lives under Labour plans to reshape the welfare state, The Times has learnt.

The £1 billion proposal is aimed at allowing thousands of families to keep their homes and savings. It is seen as a key step towards creating a comprehensive national care service.

Andy Burnham, the Health Secretary, will commit Labour today to providing a system of universal care for the elderly funded by compulsory contributions from all.

He will disappoint some charities for the elderly, however, by postponing key decisions on funding and asking a cross-party commission to take charge of the issue. Although a re-elected Labour government would legislate for a compulsory system in the next parliament, such a system would not come into force until the following one.

Alistair Darling, the Chancellor, indicated last night that the Government had moved away from the swift imposition of an estate levy, characterised by the Tories as a “death tax”.

But Mr Burnham, in an interview with The Times, billed the scheme as the biggest shake-up of the welfare state since 1948. “If people need care and support, they get it,” he said.

Labour will use the policy, unveiled in a White Paper today, to argue that it boasts big ideas for a fourth term.

Mr Burnham said that people would be able to choose from a range of options on how they pay for long-term care — to be drawn up by the commission. Proposals already discussed include people making contributions into a fund during their working life, or diverting some pension benefits after 65, or facing a 10 per cent levy on the value of their estate. It is understood that ministers are also exploring the idea that people on benefits should make contributions from their welfare payments.

Mr Burnham said that extending the principles of the NHS to long-term care for the elderly was Labour’s answer to “the biggest single domestic policy challenge that the country faces”.

Labour will seek to use its plan to establish a key dividing line with the voluntary insurance scheme being proposed by the Conservatives.

The goal of a universal system is the third of three stages Mr Burnham will outline. Under the first, he will make concessions to the House of Lords today in an effort to get the Personal Care at Home Bill through Parliament before the election. Critics say that the £670 million it provides is not enough to care for the 400,000 most needy that it seeks to cover.

The second would mean the Government picking up the bill for residential care for anyone after their first two years in a home, at an estimated cost of £1.1 billion.

Mr Burnham will recognise that the ballooning costs of care for Britain’s ageing population will also require billions in additional funding over the next five years — even before the comprehensive system is introduced.

He will outline £4.7 billion worth of measures, including the transfer of £1.8 billion from the NHS budget into social care from 2014-15, and £2.2 billion in savings from helping people to stay in their own homes instead of going into residential care, which costs four times as much.

The freeze in inheritance tax thresholds for four years, announced in last week’s Budget, would raise up to £500 million a year. Another £200 million would come from the decision to abolish the default retirement age of 65, or raise it, also announced in the Budget.