Paul Burstow says it will be ‘brave’ to find £1.5bn for care reform by withdrawing fuel help from most pensioners
Most pensioners should lose the winter fuel allowance in order to pay for reform of the care funding system, a senior Liberal Democrat has proposed in a challenge to the government on what is a key issue for the rest of this parliament.
Paul Burstow, who was care services minister for the first two years of the coalition, said it would be “brave and caring” politics to decide now to find £1.5bn for the reform by withdrawing the fuel allowance from at least three in four old people.
Writing in the Guardian, Burstow said: “To help the 75% who will need care, we should look at the evidence and recycle the proceeds of a benefit that 80% of older people do not require.”
Ministers are expected to announce shortly that they will move forward with care funding reform in England based on a watered-down version of plans tabled by the Dilnot commission 18 months ago. The move would cap individual liability for care costs and prevent some people from needing to sell their homes.
Agreement on reform has been held up by arguments in government over how to fund the changes, which the commission costed in their full form at an initial £1.7bn a year, rising to £2.8bn within a decade.
Burstow says the coalition should announce that it will find the bulk of the money by means-testing the fuel allowance, with a further £600m coming from imposing capital gains tax on the estates of “the wealthiest” people when they die.
His intervention forces the issue after coalition tensions surfaced last month, when Nick Clegg said his party would “look again” at universal benefits for pensioners. He was slapped down by David Cameron’s official spokesman, who said: “The prime minister made a commitment to protect those benefits and he believes in keeping his promises.”
By making a specific public proposal to axe a universal benefit, even though it would not take effect until after a general election, Burstow’s proposals could be taken up by his party as they seek to put more clear water between themselves and their Conservative partners.
Lib Dem insiders said Burstow, who lost his ministerial position in September’s reshuffle, was not a close ally of his party leader and not likely to be speaking for Clegg. Burstow has been previously critical of the government, especially the Treasury, delaying action to reform elderly care.
There is widespread agreement that funding for the elderly is too skewed to benefits such as the fuel payments and free bus passes and does not help enough with essential care costs. Even some Conservatives regret Cameron’s panicked pledge to save universal elderly benefits during a pre-election debate in 2010.
However, the coalition seems poised to implement Dilnot’s proposals.
Lib Dem Norman Lamb, who replaced Burstow in the health department, said: “The government has made clear that, in principle, it supports care [reform]: I clearly want to legislate to implement it.”
The fuel allowance is a one-off, tax-free payment of £100-£300 to people aged over 60 to help with winter heating costs. Last winter, it was paid to 12.7 million people at a total cost of £2.1bn.
In a pamphlet to be published by the Lib Dem thinktank CentreForum, Burstow describes it as “an anomaly in our welfare system” and an ineffective way of targeting help. He proposes paying it only to those claiming pension credit, currently 2.1 million, although 3 million are eligible.
He calculates this would save at least £1.5bn which, along with £600m from capital gains tax on assets of more than £10,000 (excluding primary residences) left in bequests, could fund a cheaper version of the Dilnot recommendations.
The commission suggested a £35,000 cap on individual liability for care costs. Ministers are thought to be considering setting it as high as £75,000, but Burstow proposes a £50,000-£60,000 cap, combined with an increase in the asset threshold, at which liability cuts in, from the present level of £23,350 to £100,000.
If the cap was set at £50,000, he says, people would face having to use a maximum of 22% of the value of an average home (£231,000) to pay for care costs, compared with at least 65% at present.
Age UK, the leading charity for older people, expressed caution at the funding proposals but did not appear to rule out using fuel allowance cash to pay for care reform. Its charity director general, Michelle Mitchell, said: “We appreciate that the country is facing difficult financial times, but we must be careful that the wider implications for older people of any potential source of funding are fully considered.”
Ros Altmann, director general of the Saga group of companies that run older people’s services, said: “I understand the urge to scrabble around to try to find money for Dilnot, but this would be a real false economy. Only 2% of pensioners are higher-rate taxpayers and if you start taking money away from people below that you are going to be hitting people who really need the help.”
Andrew Gwynne, Labour’s shadow health minister, accused the government of making the delays in dealing with long-term care even worse by cutting local council budgets “too far, too fast”.
“This is costing us all more as more older people end up having to go into hospital or more expensive residential homes when they don’t need to,” said Gwynne. “The government is completely out of touch with the immediate care crisis. Instead of sticking their heads in the sand, they should engage in serious cross-party talks so we can get a proper agreement across all the political parties about how we fund long term care in future.”
A Department of Health spokesman said ministers agreed with the principles of the Dilnot commission but were still looking at how to fund its recommendations.