Social Care - Health Committee Contents

5  The Dilnot Commission

84. The Dilnot Commission set out to establish how the future system of funding social care could be made to be sustainable and resilient, fairer for individuals, families and society, value for money and as clear and simple as possible.[84]

85. The key recommendations of the Commission's report concern the introduction of a series of caps on the contributions required from individuals to the cost their own social care. They recommend a cap of between £25,000 and £50,000 (£35,000 is suggested) on the amount that any individual has to pay for their care, after which the state would bear the costs. They also recommend that this capped figure would not include costs associated with accommodation, food and other living costs, but that these should subject to a separate cap of between £7,000 and £10,000 per year.[85]

86. Dilnot also recommends the implementation of better needs assessment processes, portability of assessment, and better assessment and services for informal carers; he argues that the current means test threshold should be raised from £23,250 to £100,000, that eligibility for care should be standardised across England, and that people should be able to defer payment until their home is sold as part of their estate; finally he recommends that a new information and advice strategy is required.[86]

87. The Committee has found that there is a broad consensus in favour of implementing the main findings of the Dilnot report. Gillian Manthorpe, Director of the Social Care Workforce Research Unit at King's College, London told us:

Dilnot represents an opportunity to move this into its next phase, even if it is not yet the entire answer, because we do not have public confidence, at the moment, in the social care system. We certainly do not have a good understanding of what social care offers, how it is funded and what implications there are for families […] The Dilnot report gives us the best analysis we have had, probably, for a very long time. There is a risk of giving it the thumbs down and saying, "No. It has to go into the long grass," but that would be a very poor outcome.[87]

Richard Humphries from the King's Fund agreed, stating that:

The almost unanimous support given to Dilnot's recommendations suggests we are on the cusp of not a total solution, as colleagues have alluded to, but at least a way forward, a way through it.[88]

88. The capped cost model proposed by the Dilnot Commission represents an important element of the total funding model, but it is not the whole answer. The Committee recommends that in its forthcoming "progress report on funding", the Government should accept the principle of capped costs and outline proposals on where the cap should be set.

89. Dilnot also recommends that there should be a separate cap on living costs of between £7,000 and £10,000 per annum. We support this and recommend that the Government accepts it.

90. The Committee believes it is important that the future shape of social care is not dominated by a debate about the technical details of funding. It is essential that services are shaped by the objective of high quality and efficient care delivery, and the funding structures are fitted around that objective, not vice versa. It is, however, unsurprising that there is a focus on funding issues given the current financial stress on the care system.

91. Although the Committee supports the implementation of the main recommendations of Dilnot, it believes the narrow terms of reference given to the Commission meant that the more fundamental issues about the need for a more integrated care model were only addressed in passing by Dilnot.

Capping care costs

92. The Committee also believes some fine-tuning of the capping proposals is required. The charges levied for social care, and assessment of social care need are determined in part by local authorities. At the moment this leads to variations in access to, and charges for, social care. These variations are in themselves not necessarily a problem as they may simply reflect local variations in labour costs or assessment practices. However a problem may exist when the proposed national cap on care costs for the individual is transposed over a local system of assessment and pricing.

93. The system proposed by the Dilnot Commission would require some means of assessing the care needs of all persons who present to a local authority and then "metering" care so that each local authority can establish when the individual has or will reach the level of the cap.[89] The Committee is concerned that this could create a situation where two people with identical care needs, but who live in different local authority areas, could reach the cap at different times.

94. The care meter could also disadvantage people who live in areas where property prices are depressed, especially if a higher level cap is introduced. Some recent media stories have suggested that the level of the cap on care costs would be set at £60,000 as opposed to between £35,000 and £50,000 suggested by the Dilnot Commission.[90] A £60,000 cap would clearly represent a larger proportion of the housing value of those people living in those parts of England where a house can be bought for £60,000 or less.

95. It has been suggested to the Committee that some of the disadvantages of the cap expressed as a cash sum could be addressed if the cap was expressed as a period of time. The Committee understands that the Dilnot Commission considered this approach and rejected it on the grounds that it would make the actual cost of the individual's contribution dependent on the acuity of their care needs during the period involved.

96. The Committee recommends that the Government should look again at the principle of expressing the cap on care costs in terms of the length of time that people fund their social care for themselves in its progress report on funding, ensuring the equivalence of care standards before and after the cap is reached. Further work however is required to address unintended anomalies caused by regional variations in housing values and the difference between domiciliary and residential care costs.

Financial products

97. One other element of the Dilnot proposals is the potential stimulation of the market in financial products that people could use to fund their contribution towards their care needs. The Dilnot Commission report is clear that no major financial services providers offer pre-funded insurance against social care costs making it difficult for people to plan for the financial consequences of having a care need later in life.[91] The Strategic Society Centre told us that the pre-funded insurance market for social care is unlikely to grow under the Dilnot proposals:

[…] it does not expect a pre­funded insurance market to grow in response to its recommendations or in response to the capped-cost model. It talks about different sorts of financial products, but in terms of pre­funded insurance, which is one of the key financial products people have often talked about in relation to long­term care and the potential for such a market, it is very specific in saying it does not expect that market to develop to any significant degree in response to the capped-cost model.[92]

This was reiterated by the Association of British Insurers who told us that:

[…] it is unlikely you will find pre­funded products developing. It is difficult enough to get people to save sufficient for their pensions without thinking of saving for a product which they may not need for 40 or 50 years.[93]

98. There are some specific products that are taken out when people have a care need, such as equity release and immediate-needs annuities, that may grow if the cap on care costs were implemented. Immediate needs annuities (INAs) are a type of insurance product that individuals purchase at the point of entering residential care. In return for a significant up-front payment, the annuity will pay out a regular income until a person dies, covering all (or most of) their care fees. In return for the lump-sum premium, individuals purchasing INAs obtain protection against the possibility that they will survive for a very long-time in residential care, and therefore spend all or most of their wealth. However, Chris Horlick from Partnership Assurance (a provider of financial products in this sector) told us that the immediate needs annuities market is small and that "I do not think the Dilnot model in any way would attract fresh money in".[94]

99. Equity release products aim to support individuals in retirement to access part of the value of their home. They have been identified by Dilnot and others as a potential source of income for older people, particularly in the context of historically high rates of home-ownership and house price inflation experienced over the last decade. The Committee has heard however that these products are relatively novel and have not yet been widely taken up. As Professor Martin Knapp told the Committee:

I also agree […] about the equity release model. To me, it feels like the more attractive and viable approach. It has not been any more successful in getting off the ground than long­term care insurance until recently, but I understand there are some experiments under way, and perhaps we can learn from those.[95]

100. In contrast to the relative pessimism of the financial services industry, Andrew Dilnot gave a much more upbeat assessment of the likely market for financial products in the future:

I have no doubt at all, having spoken to the really big players in the financial services sector at the highest and most senior level throughout this, that there is enthusiasm for getting into this market. The financial services strand of the Department of Health's consultation on this has already published some of its developing findings. It says things like, "There is strong support for capping care costs:—This would provide a major opportunity for behaviour change," and, "It would facilitate a range of financial products." That is across the financial services sector as a whole

[…] Our view is that there would be very significant development in two areas, mainly housing-related and pension-related, because those are the two big assets that people build up. For many people, once a cap is in place they will simply treat the funding up to the cap as part of their general asset accumulation strategy. They will want to build up some assets that they might use to help out one of their children, go on a long holiday, build an extension or do the things they have wanted to do. Rather than wanting an insurance product, it will be part of their lifetime savings strategy. They might then spend that money through either equity release from their house or by a policy that was related to their pension.[96]

101. The Government should clarify the likely market for pre-funded insurance, equity release, and immediate needs annuities, as well for pension-related and other products. It should also articulate how it will work with the industry to stimulate the market for these products.

84   The Commission on Funding of Care and Support, Fairer Care Funding. The report of the Commission on Funding of Care and Support, July 2011 Back

85   Ibid.  Back

86   Ibid. Back

87   Q 2 Back

88   Q 7 Back

89   The Commission on Funding of Care and Support, Fairer Care Funding. Volume 2, Analysis and Evidence Supporting the Recommendations of the Commission, July 2011 Back

90   For example see "Social care crisis needs reform now, says report author", The Mirror, 18 January 2012 Back

91   The Commission on Funding of Care and Support, Fairer Care Funding. The report of the Commission on Funding of Care and Support, July 2011 p39 Back

92   Q 323 Back

93   Q 325 Back

94   Q 324 Back

95   Q 2 Back

96   Q 444 Back

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Prepared 8 February 2012