Saturday 20 May 2017

What is the Dementia Tax?

On page 67 of the Conservative Party manifesto (analysis here), Theresa May's "team" announces a significant shift in the way elderly care is going to be paid for. Their plans have generated a great deal of controversy which, combined with means testing for winter fuel payments and ending the triple lock on pensions, moves the Tories away from protecting pensioners from the squeeze they unnecessarily put on public finances to one where they're going to have to also pay. It has proven hugely controversial. Some Conservatives are very unhappy with it, and you can bet this view is shared by more than a few of their MPs. Setting aside the politics of the changes and why the Tories have decided to put this policy in their manifesto, what do the measures mean and why is Labour dubbing it the 'Dementia Tax'?

Presently, recipients of residential care have to part fund the service they receive if they have assets in excess of £23,250. If they are applying for a place in a home, they have to include the value of their house in the means test. As around two thirds of pensioners are home owners, this often means selling the house from under them to pay for their care package - though an option exists to defer costs. To demonstrate, assume a 75 year old pensioner requiring residential care has £25k in savings and their house is worth £89k. Leaving aside income and assuming that person then lives for a further six years (in line with current life expectancy), according to care costs calculators for Staffordshire (because that's where I live) you're talking upwards of £190k. Note this will vary from county-to-county and by local authority area. Therefore, our pensioner would presently be required "contribute" almost £91,000. The remaining £23k of their assets will remain theirs. If on the other hand our pensioner requires domiciliary (at home) care, the application in this case would take into account their savings only. This care is cheaper, costing between 70-75% of being in a home and their contribution would be just £1,750 (again, leaving aside income from their pension(s)).

What they giveth in one hand they taketh with the other. Under the proposals in their manifesto, our imaginary pensioner above wouldn't have to pay anywhere near as much as the Conservatives promise to raise the capital floor to £100,000. Their contribution would shrink to just £14,000. Sounds alright, doesn't it? But here's the catch. The Conservatives want to redefine the asset base so the house is counted for residential and domiciliary care. Another change is they will only come for the assets after the person in receipt of care has died. On the surface then, pensioners who are poorer or moderately okay like the example given would benefit. But older people whose combined assets are in excess of £100,000 are going to get clobbered. Or, rather, their families and children are. The problem for the Tories is this is their vote base, and there are millions of pensioners in this position. All of a sudden, estates of people in receipt of domiciliary care are going to receive steep bills after their loved one has died.

This sets up all kinds of problems and difficulties. For pensioners living as couples, how does this recoup costs from shared assets like a home? If their house is £250,000, would the estate be expected to pay £150,000 or £25,000? And in either case, would the surviving partner be expected to liquidate their shared asset to pay the bill? Likewise, for live-in carers who might be sons, daughters or whatever, can we safely assume that they will be expected to sell up their inheritance to pay the balance off? And what will they do about the scramble of elderly people transferring ownership of assets to relatives before they put in a care application and therefore avoid the charges? Unfortunately, none of this is clarified in their manifesto. Unlike Labour who provided costings for their pledges, the Tories chose not to.

The Conservatives say they're doing this to put adult social care on a firmer footing. Since 2010, the Coalition and then the Tory majority government have foisted tough cuts on most local authorities by chopping down the local government grant year-on-year. As budgets have got tighter, councils of all political complexions have had to redesign, strip down, and withdraw services. This has mean adult care could not but be hit too. Waking up to it belatedly last year, partly thanks to the winter beds crisis in the NHS, the government have allowed councils to increase council tax by an addition 2% to pay for adult social care only. But this cannot fill the gap, and so the Tories are moving to a model whereby the user pays after the fact.

The result would be to grow the number of people eligible to pay more for their care. Hence why it has been dubbed the dementia tax. None of us know what care needs we might require when we get old. None of us can really do anything about avoiding them either. We all get weaker, a good chunk of us will suffer health complications, an unlucky number are going to develop dementia. Whatever happens, the state will look after us and when we die, grieving relatives can look forward to demanding letters from the council asking them to hand over tens, and in some cases, hundreds of thousands of pounds. The dementia tax is a tax on old age and that's why, despite everything, it could cost the Tories the general election.


David Timoney said...

I'm not sure this is as risky a commitment as you imagine. It's effectively a lottery, but the old folk who will vote are the ones who are current "winners" - i.e. not affected by dementia. Pessimists who anticipate a future care need might be put off, but if Brexit has taught us anything, it is that the Tories' base includes a lot of optimists.

Speedy said...

Families can no longer get away with signing over their property.

There is a sweet kind of irony in the vast amount of Brexiters that will be hit by this, although as you point out, just like their conceited vote to Leave, it will be their heirs who pay the price.

What's ironic is that nobody seems to question the principal - how about funding old age and tuition fees instead of Trident and bailing out banks?

How dumb of me.

Phil said...

Short thread here on the point about combined assets:

Lidl_Janus said...

"despite everything, it could cost the Tories the general election."

This will still require some doing. The last two polls I've seen point to Conservative majorities of 46 and 78, and in order to lose their majority, Labour need to cut their lead to 4%pts.

For Labour to be the biggest party, we'd need something like LAB 39, CON 35, LIB 9, UKIP 2, GRN 2. It's not wildly implausible, but the Conservatives would have to lose something like 10%pts and around half of it would need to cross directly to Labour.

This also assumes Labour doesn't pile up votes in safe seats, which it is historically very bad at doing.

Anonymous said...

How will this affect disabled people who received social care packages from their local councils? It's not just old people who get help, what happens to us and our families with this policy?

James Semple said...

You don't liquidise assets. You mean liquidate. Is English your native language?

Phil said...


Anonymous said...

"The Conservatives say they're doing this to put adult social care on a firmer footing."

It will do no such thing as it doesn't address the real problems at all. Domiciliary care is only a very small part of the picture although the Tories STP plans for the NHS want to make it much bigger. Dementia is often impossible to manage at home without 24/7 care and 24/7 care at home is even more expensive than a care home. Meanwhile, there's a shortage of staff because the jobs are so exploitative.

What this is is the extension of the marketisation of care into the insurance industry. The £100,000 figure they're quoting is exactly the figure the equity market suggest as a minimum value for a 'reverse mortgage'. Thus the £100,000 may not be taken for care fees but it WILL be used for interest payments and premiums.

And that's if you trust them not to sell on the packages and change the terms of the deal as they've done with student loans. This is a really nasty policy and it needs to be fought all the way.

Unknown said...

Who's doing mountains of this care currently? Experience suggests a large amount are Eastern Europeans and non European staff. Will they still be here after Brexit? Not entirely certain this is going to play out well.

Anonymous said...

All of this to digest and you can only pick up on a spelling error. Most likely caused by pesky autocorrect.

helen said...

What no one even the journalists have picked up in all of this is the major inequality that already exists with social services only paying £450 per week while private payers are charged over £900a week for residential care and thus heavily subsidising the social services residents

The real anger now is that those with a house or assetts will be doubly stripped especially if they dare to live in tthe South
In Maidenhead Teresa Mays constituency the majority of houses are well over £500,000 and in the entire area all around there thousands of new houses being built at well over £900,000
The older owners of these homes are not rich often their incomes are way below average incomes and any savings income has taken a real hammering thanks to B of E and FLS and TFS

If Teresa thinks 100k split between 6 grandchildren will assist them ever manage to buy a home she really does need to rethink the whole scheme ....people are very rightly angry

Anonymous said...

I think what May has done here is fail to recognise the extent to which, for many many people, the prospect of being bequeathed a sellable house is the only light at the end of a grim financial tunnel, and she's just blithely promised to extinguish it.

On the one hand it's true that £100k is a fairly decent estate (for most people) but that is scant consolation when you have been had your eyes set on something maybe five times that sum. It's the sort of idea that would have been a hard sell pre-2008 but post-2008 feels like a sort of betrayal.

Let's face it, the people who are complaining aren't the senior citizens who will be needing the care. They are the gimlet-eyed middle-aged middle-class buggers who, egged on by an endless succession of Daily Mail front pages, have been hoping and praying the house price bubble doesn't go "pop" before mum and dad have both carked it.

Speedy said...

Funny that the whole class thing hasn't come up in this - much of the country has benefited from inflated house prices (among those who own them, which is proportionally quite a lot since Thatcher's sell-off) and, in a sense, this could be said to be thanks to the other sacrifices - in terms of rights, market flexibility, etc - the British have made as part of a kind of compact in social mobility, ie prices have gone up because the economy has been booming, this has made a lot of formerly working class people capital rich, which in turn could be said to have aided their social mobility (except it hasn't, but they probably don't see it like that).

What's interesting is that you see the true nature of the Tories come out when they think the are unassailable - punish the lower orders for getting above themselves (just as they sought to make higher education so expensive, albeit thanks to the niavety of New Labour). Of course, the Labour Party always dragged their feet over this too because they also rather like the proles to know their place - there was something unpalatable about ordinary people making tons of unearned cash, and probably voting Tory, which was why so many of them indeed did end up voting Tory, only to be reminded whose side the Tories were on - ie, not theirs.

Essentially people are squeezed between two out-of-date parties, one with its roots in the 19th Century (Tories - and landed interest) the other in the 20th (Labour - and industrial working class). Combine this with 80 per cent of the media focused very much on the 21st Century global neo-liberalist interest of its proprieters and you can see why the British are truly fucked.