Tuesday 5 July 2011

UK Elderly care provision

This new report on the financing of care is not very capitalist in its approach. Admittedly, care home provision is a definite public good and so even a red in tooth capitalist such as myself is not inclined to look for a pure market solution.

However, middle class subsidy and a tax rise can't be the best answer either; in fact, it is positively distressing to me that the 'new' Government is coming up with the same sort of middling left of centre ideas as the last one.

Core to this is the British people's obsession with housing. the new policy has a cap of £35,000 that someone can contribute to their care costs - this of course is on top of their free NHS healthcare. The idea that paying more than this is too burdensome for most. This is a ridiculous assumption, made real only because otherwise 'people would have to sell their houses.

Imagine if instead the concept was 'people would have to cash in their lifesavings.' What is wrong with this? Surely if you have access to funds you should pay for your own care. If your children are worried about their inheritance then perhaps they should do something about it themselves rather than waiting around for their parents to die?

However, obsession with house prices and indeed using houses as our primary savings vehicle has completely skewed the political view here to one where no one must mutter about selling ones' house. No doubt Leftwingers are going to call selling ones house to pay for their own care 'foreced homelessness or ' dispossession.'

Anyway, so far, so ideologically unsound. Next up is a tax on pensioners to pay for care provision. This is even worse, pensioners of the future are going to have a bleak time. At best they are going to be on an average income below minimum wage - and this is already taxed. So increasing taxes here is disproportionate. After all, many people will end up in care, so even with this daft idea of a tax, it should fall on everyone. What next a cancer tax? A blindness tax only for the blind? (OK, OK, I appreciate we have tobacco taxes already....).

The sums at stake are not big for the Government - but the principles are. People should prepare for their own needs where possible and to create a new system of entitlement also sets a bad precedent in that the incentive to save is removed.

Charities who support this also have come out with some daft ideas like reducing pension tax relief to pay for this or increasing VAT by 0.5%.

It's a real horlix- but to the rescue could come the insurance in providing a personal way out of this mess if they can come up with some useful products for people to buy. Given the shoddy treatment meated out by insurers to pensioners, this is a statement of hope rather than expectation....


Steven_L said...

What I don't understand is how an average person selling and average house (£160k? - a lot more in the south) then investing the money in a good income fund and receiving a state pension can't afford care home fees while protecting their capital? If we need more supply of them the LA's can provide a planning windfall gain to build more of them.

If people want to protect the capital the solution is that the house gets sold and the money invested in purpose designed income funds or the house gets rented out for income.

All the income, plus all your pensions (state and private) go into a big pot and pay for care nationally. Rich southerners subsidise poor northerners for the last few years of their life, but they'll have been doing that for the previous 80 years anyway.

Your capital is then passed to your estate when you die. Wealthy southerners still get their million pound inheritance and poor northerners get old age care. People don't survive long in these places anyway.

There problem solved, it's not bloody rocket science!

Anonymous said...

The boomers (55+) own something like 80% of the net assets in the UK (including pension assets and housing).

So we should start on the basis that the boomers can and should pay for their old age, rather than forcing the burden on general taxation.

Why do you object to a tax on pensioners' income, rather than a tax on their wealth (by raising the contribution cap)? I don't follow that.

Demetrius said...

As a Mad Old Blighter who owns his home and recognises that this was just another form of saving I agree with much of what you say. Why should property be protected but not other forms of saving? I put a long comment on John Redwoods to the effect that the working taxpayer simply cannot carry this burden.

Jan said...

Hear hear...

Some pensioners are rolling in it and should definitely be willing to sell their homes to fund care. The next generation (and that includes me as a baby boomer) will have to sort themselves out. I don't see why taxpayers should stump up for people who are well able to pay their own way. The goverment act as if they're frightened with all this pussy-footing around. So what if people don't get the inheritance they were expecting. If they want to keep it intact they should consider caring for their parents themselves so saving the care-home fees.

Old BE said...

If the Cons are coming up with crap like this then I am seriously considering moving away. Talk about moral hazard! What is wrong with selling one's assets to pay for things that one wants to buy, in this case care services? Jeez, if you are in a care home you can't bloody live in your old house anyway, can you??

Perhaps I should have run to the government for a handout when my mum had to downsize to fund her retirement.

CityUnslicker said...

SL - well done, I agree with most of that. Even investing in gilts etc would be a better plan than the current one and would maybe do the trick?

Anon - Yup, boomers do, but then older people always will - I don't think a tax increase is a good idea at all anyway as you see - but hypothecation is a dangerous route to go down which is why the Government has rightly avoided it elsewhere.

CityUnslicker said...

BE - love your last point re caring for yourself.

This is madness, worse, the press I have read today are lapping it up; do only pensioners buy newspapers or something?

BrianSJ said...

The other end of the scale seems missing from the debate. What about the feckless dependency class? What is their 'entitlement' compared to people who have worked and save.
I remain etc.
Col. (Retd.) Grumpy

GSD said...

Call me cynical if you like, but I reckon that we'll be seeing a lot more "pensioner friendly" policies (or perhaps just promises of policies) over the next 10yrs. From all of the parties. I think that they grey vote will become really significant just due to demographics, and that we'll end up footing the bill.

Of course, by the time I reach retirement, the policies will all have been reversed!

Back on topic:
I've always thought that The selling of the abode to pay for nursing care is pretty harsh on the remaining spouse.

Annuities have been so low recently that I feel a lot of ppl would be better off having their whole pot as a lump sum and living/paying for care out of that.
I hope that the solution that will be arrived at will be a "care account" (possibly capped) that the estate is liable for like IHT.

andrew said...

Pensioner Friendly Policies!

Finally, someone has noticed that more than half of the people who voted last time were over 55 - ie retired or looking at retiring in the next few years.

Of course every child (often in their 40s and older) wants free care for their parent paid for by someone else, and then to inherit the house - so they can pay off the mortgage and retire early.

Anonymous said...

It's 100% clear that the only rational thing now is to hit retirement with no capital what so ever.

The house should be wrapped in a trust etc.

The hollowing out of middle-class wealth is now in full swing, as the elite bleed dry the savers and the workers.

Well f**k them, I'll be at the benefits office with £0 and the clothes on my back same as the millions of idle and chavs.

Maybe the 'answer' will be Soylent Green?

Elby the Beserk said...

Great idea to tax pensioners even more. After all, Brown put a - what, 40%? - tax on my pension at source. What is then left of it is taxed at 20% when I get it, and then it is taxed when I spend it. What the hell. Bury me now.

andrew said...

It is not widely known, but through a statutory instrument the tax on landfill is being raised to £200 / tonne from April 2012 and it's scope being extended to include all forms of sub-surface disposal - including burial.

CityUnslicker said...

that will really hit those fat chav's then Andrew and the fat bankers?!

Electro-Kevin said...

All very good comment, CU. Except for one thing:

layabouts and shysters getting theirs for free and often subsidised by the poor mug in the bed next to them who bothered to save for a pension.

The amount going in overseas aid could pay for all this many times over.

I think the Cons and Cam are in for very low support at the next election.

Electro-Kevin said...
This comment has been removed by the author.
Mark Wadsworth said...

"[This] obsession with house prices and indeed using houses as our primary savings vehicle has completely skewed the political view"

The obsession has completely skewed the political on just about anything you care to imagine, the main function of the UK government appears to be keeping house prices as high as possible and regardless of the economic cost.