Care Bill [Lords]

Written evidence submitted by Northumberland County Council (CB 12)

Care Bill clause 15 – "taxing" carers?

 

1. Summary

1.1 The specific mechanism for crediting care accounts set out in clause 15 of the Care Bill has a serious flaw which has not to date been widely appreciated. It would mean that, in some quite common situations, the consequence of family members providing unpaid care rather than asking the state to provide care would be that the person would pay substantially more towards the cost of their care than if the family had chosen not to do so – a consequence which might understandably come to be perceived as a "tax on carers" (and which might lead some people to look first to the state for support rather than making the most of family and community resources).

1.2 This submission explains how this problem arises, and suggests an alternative mechanism which would achieve broadly the same distributional outcomes without the perverse incentives. We have raised the general issue in our response to the DH consultation on funding mechanisms, and in related discussions with civil servants, but unlike most issues covered by that consultation this is a problem which could only be corrected by changes to the Bill itself and could not be dealt with in regulations and guidance.

2. The problem

2.1 The basic policy intention of the Care Bill is to cap the amount which any individual might have to pay for their care. However the mechanism set out in clause 15 of the Bill is not a cap on total payments by individuals, but a cap on total expenditure by the local authority, actual or (in the case of people making private arrangements) notional.

2.2 This mechanism was proposed by the Dilnot report, though it was explained only briefly in that report, and many readers missed its significance. Its policy justification was to ensure that people with relatively low incomes would benefit from the cap. If the cap had applied directly to the total charges paid by individuals, people whose financial circumstances meant that they were only assessed as being able to pay a modest contribution towards the cost of their care would continue to pay charges for many years, and would often get no benefit at all from the cap. This was felt to be unfair, so it was proposed that what should be credited to the care account for people in this situation ought to be the total cost of their services, so that they would reach the cap after the same length of time as people who could afford to pay the full cost.

2.3 This mechanism was adopted in the Care Bill. Unfortunately it has serious unappreciated flaws. While it would spread the benefit of the cap more widely, it would have significantly unfair consequences for some people with carers.

2.4 The problem would arise in a particularly acute form where an older person with care and support needs owns their house but has only a modest weekly income. An example would be an older homeowner living on their own who is in receipt of Attendance Allowance and Pension Credit. If a person in this situation chooses to receive local authority services, they might typically be assessed as able to pay up to £50 per week in charges, but if they have limited support from carers it would not be unusual for them to receive home care and other services costing £200 per week. The care account of an older person in this situation would therefore be credited with £10,000 a year.

2.5 A second person in otherwise identical circumstances might have family members who decide to provide substantial support themselves, reducing the cost of the services which needed to be arranged by the local authority to £50 per week. The result would be that that person’s care account would be credited by only £2500 a year, though the charges paid by this person would be the same as for the first person (£50 per week).

2.6 If after three years both people’s condition deteriorates to a point where they need to move into a care home, the person whose family has provided most of their support will have £22,500 less in their care account than the person whose family have relied entirely on publicly-funded services, despite having paid the same amount in charges – and might therefore have to spend more of the value of their house on paying for their residential care. By providing care, the family would have reduced the costs to the public purse, but would in effect then be financially penalised for doing so.

2.7 There are potentially also further perverse consequences of the mechanism proposed in clause 15 – for instance if a local authority chooses (or is required by regulations) to provide some care and support services without charge, the cost to the public purse might be up to twice the cost of the services themselves, since the amount spent would also be credited to care accounts, potentially reducing the local authority’s future income.

3. A suggested solution

3.1 We think there is a straightforward solution, which would avoid the perverse consequences of the mechanism in the Bill, while still achieving the current policy objectives, including spreading the benefits of the cap widely.

3.2 The solution would work as follows:

a) Clause 15 would be amended (with consequential changes in Clause 29 and possibly elsewhere), to provide that what would be credited to care accounts would be either the charges that the person had paid to a local authority or, for people paying privately with an "independent personal budget", the value of that "budget" (which would also correspond to spending by the person themselves, and therefore be equivalent to charges).

b) Clause 15(4) would be amended to provide that the cap on charges could vary depending on the financial circumstances of the person, as well as their age and description.

c) Rather than setting a cap of £72,000 for all older people (and setting caps for younger adults based purely on their age when they first need care and support), regulations would provide that for people who ask the local authority to arrange care and support services, the cap would vary in a prescribed way depending on information gathered during the financial assessment required to set their charges. This would impose little or no additional administrative burden on local authorities, since they would already be required to collect the same information in order to set charges.

d) Service users on lower incomes would be set a lower cap, designed to ensure that they could typically expect to reach the cap at about the same time as people who can afford to pay the full costs of their care.

e) People making private arrangements would have their cap set purely on the basis of their age, unless they chose to request a financial assessment in order to benefit from a reduced cap (an option which would protect the small number of people with low incomes who might choose not to ask the local authority to commission their services).

3.3 The effect would be that, in the illustrative situation described above, both older people would have a cap set at a level substantially below £72,000, and both would have the same level of credits in their care account at the point when they needed residential care. Careful financial modelling would obviously be required to ensure that the overall costs to the public purse remained unchanged, but that would be an implementation issue rather than affecting the Bill itself.

January 2014

Prepared 17th January 2014