Is it such a bad thing if people who’ve built up substantial assets use them to pay for their care rather than passing them on down to their children? (If the assets are houses, this’d mean mortgaging the house or using some alternative setup where you continue to live in your house but don’t pass it all on when you die.)

@TomAsh

Good point.

The report doesn’t explain exactly why the taxpayer should spend £5 billion/year by 2020 to provide free asset insurance to those with assets of more than £100,000. Some kind of levy on estates that people are allowed to defer until after their death may be fairer?

It also doesn’t explain why the private insurance industry should get a big subsidy to guarantee its profits.

Or why the cap should be set at the level suggested (conveniently at the level at which an £8,000 private insurance product protecting all assets could be offered – didn’t one of the parties have a manifesto commitment on this?).

Good for wealthy baby boomers though!

Slide 22 of Dilnot’s presentation illustrates the regressive nature of the proposed reforms.

https://www.wp.dh.gov.uk/carecommissiom/files/2011/07/CFCS-launch-presentation-WEB.pdf

I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left. Why not use the money to improve care for those who cannot afford to pay (e.g. provide support for those with less than ‘substantial’ needs on FACS criteria)? Surely this is the pressing problem – poverty-stricken elderly people denied the support they need to ribose dignity in old age.

@ 1 Tom Ash

“Is it such a bad thing if people who’ve built up substantial assets use them to pay for their care rather than passing them on down to their children?”

No – but obviously that’s not the only potential result of making people pay for their care. Seems to me that the fairest way to resolve your issue is for the state to pay for care, but tax inheritance to do it.

“I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left. Why not use the money to improve care for those who cannot afford to pay (e.g. provide support for those with less than ‘substantial’ needs on FACS criteria)?”

Don’t know how this fits with the specifics of Dilnot, but if the reforms put social care on a more universalist footing, then isn’t there a good social democratic argument in favour? In the medium term, people who can’t afford to pay will do better from a universal system which everyone feels that they benefit from than from a residualised system, even if the short term distributional aspects aren’t progressive.

It’s a shame the ‘death tax’ – a levy on care users’ estates – got taken off the table, because that still looks to me like a sensible option.

Still, the Tories had three excellent reasons for refusing to consider it:

1. It made for a nice ‘scare’ poster.

2. It makes room in the market for private companies to extract profits from vulnerable people seeking to release equity in their home, etc.

3. A levy of, say, 10% on care users’ estates would have meant people with modest assets – a house of average value, say – got a relatively good deal (10% of £175,000 = £17,500, half the proposed cap), while the rich got a relatively poor deal (10% of, say, £700,000 = £70,000, double the proposed cap.) And we couldn’t have the rich subsidising care for the poor, now could we?

@ 3 Sevillista

“I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left.”

Three reasons spring to mind. First, a system that doesn’t provide support to all will inevitably let some people fall through the cracks. You have to make the rules so they apply to the whole country, so there’ll always be outliers who find themselves disqualified from claiming benefits they badly need.

Secondly, a system like that can create a situation where those at the low end of the “wealthy” bracket end up worse off than those at the higher end of the “deserving” bracket, because the difference between them is lower than the amount they will have to pay as a result. That seems to move from expecting people to pay their way to actively penalising people for earning money.

Thirdly, affluent people are more likely to support a system that they are entitled to use, even if it is a net drain on their money. If the NHS only provided treatment for low earners, for example, with everyone else expected to buy private insurance, it might well have been shut down by now. I remember this being a key point during the debates over child allowance.

@donpaskini @chaise

Valid arguments I guess to set against my concerns.

But they need to be understood in the context that those with ‘substantial’ needs under FACS criteria will still be denied help if they are too poor to purchase support privately, while the state funds asset insurance for the wealthy.

The redistribution from the general taxpayer to those with wealthy relatives also sticks in the throat – those without wealthy family will continue to be unable to e.g. afford a home of their own while subsidising their more fortunate peers to do so (as well as funding the massive tax breaks given to home-owners)

Sevillista

“The redistribution from the general taxpayer to those with wealthy relatives also sticks in the throat”

The general taxpayer routinely pays for services and benefits received by people rich enough to cover the cost of such benefits and services privately – education, healthcare and pensions being the obvious ‘big ticket’ items. But this is 1 – fair enough, since rich people are taxpayers too and deserve to get something out of a system they pay into, and 2 – essential if we don’t want those services and benefits to wither away as they become more and more ‘targeted’ at those in need.

A world in which state-funded healthcare, education, pensions etc were a ‘safety net’ for those in need, with better-off people relying on private provision, would be a right-wing paradise of low taxes, low spending, a stripped-down welfare state and a divided, increasingly unequal society. But moves in that direction, like the Child Benefit cut, would also be welcomed by many left-leaning voters – a case of turkeys voting for Christmas if ever I heard one.

“But they need to be understood in the context that those with ‘substantial’ needs under FACS criteria will still be denied help if they are too poor to purchase support privately, while the state funds asset insurance for the wealthy.”

Certainly – if I had my way essential services like this would be free at the point of use for all, subsidized by our tax system, which (in theory) makes those fortunate enough to be wealthy pay proportionately more.

@5. Don Paskini: “Don’t know how this fits with the specifics of Dilnot, but if the reforms put social care on a more universalist footing, then isn’t there a good social democratic argument in favour?”

Already though, the argument about a common minimum standard for social care has been converted to a universal standard. Running alongside the standard arguments about post code lotteries, which for once are true.

A universal standard imposes a cap on what can be provided or may define methodology. It ignores regional differences in the type of care that is required. Minimum: yes. Universal: no.

@10. Chaise Guevara: “Certainly – if I had my way essential services like this would be free at the point of use for all, subsidized by our tax system, which (in theory) makes those fortunate enough to be wealthy pay proportionately more.”

There is a rational argument that a progressive tax system on death duties (IHT) — starting at a lower threshold — might deliver such services. There is no evidence that UK politicians are fit or willing to conduct that debate.

Very interesting summary, Dr Stone. Thank you —- More articles like this please, Sunny.

I’ve actually heard a good response to my original question: excluding people who’ve built up assets would create an incentive not to build them up. I can’t see a neat way to avoid this, but I still don’t like the assumption that old people’s assets (regardless of whether or not they’re houses) are sacred, so would rather see a universal, state-funded system combined with some sort of wealth or inheritance tax.

@ 12 Charlieman

“There is a rational argument that a progressive tax system on death duties (IHT) — starting at a lower threshold — might deliver such services. There is no evidence that UK politicians are fit or willing to conduct that debate.”

Yup. Bizarrely, the UK as a whole appears to prioritise fairness to the dead over fairness to the living.

In a genuinely fair society, inheritance tax would be 100%, although I imagine that this wouldn’t be practical in reality.

“How people meet the costs of their contribution can and will vary within and across generations, and will change over time – including drawing down equity from one’s housing assets, purchasing insurance, unlocking pension funds. There is real potential here for the financial services to work together with older people, disabled people and others to develop products that work well for people as well as being commercially viable.”

This is the tricky bit. 50% of the population share 5% of the wealth. Without substantial redistribution millions have no means of support. Over the last 30 years inequality has INCREASED along with its corollary – debt – effectively shifting income from those increasingly dependent to the rentier class, exacerbating the problem, and ensuring that millions more will be entirely dependent on the state even as the resources available to government through an eroded tax base diminish.

As even orthodox economists are beginning to recognise – excessive inequality kills economies.

There seems to be universal praise for the Dilnot report but has anyone really analysed the report in depth. For instance raising the capital limit from £23,250 to £100,000 and retaining the tariff income. Do the sums!! £100,000-£14,250 = £85,750. For every £250 the resident must contribute £1, that is £343 week, and on top of their pension(s) less £22.30 week. Far more than the local authority would usually pay in total for care. They would be better off remaining self funding! But more importantly the current problem is underfunding of the care system, not protecting peoples inheritance at the expense of the taxpayer or other services. Without a substantial increase in the what the state actually pays for care, the pressure on care providers will remain, and introducing these proposals will add complexity and not clarity.

Sevillista;

Afaik, the right place for the wealthy to pay their way isn’t via denying them universal benefits, it’s general taxation. Means-testing benefits makes them for, in the rich’s parlance, “scroungers”, and not something they see as a social good.

Certainly general taxation – and I support higher tax rates on unearned incomes, as the rich have a much higher percentage of – should be set at rates which take into account the benefits richer people gain from said universal benefits.

It works better (human minds are strange that way) AND you don’t need to pay to do the means testing!