Donald Hirsch: We must face up to rising cost of care in old age

Nowhere is it more urgent that they face up to this challenge than in replacing our system of paying for social care, which has become unwieldy and unfair – some would argue shambolic. Our growing

population of older people, a third of whom will need assistance with everyday living sometime in their lives, are faced with the stress and uncertainty of not knowing whether they will be able to afford the care that they need.

Already, many people receive inadequate help, while others have to impoverish themselves before getting any support from the state. This is true both for people living in care homes and those needing help with daily living while remaining in their own homes.

The Government and the Opposition have both accepted the conclusions of reports showing that the system urgently needs replacing with one that is properly funded and gives everyone a clear set of entitlements to a level of state support. Some people may also have to continue to make a private contribution, but a new system needs to ensure that this is done on a fair and consistent basis.

Having accepted the need for reform, the tough choice is how it can be paid for. This is where the real challenge of leadership arises. In recent weeks, we have seen instead an old-fashioned political wrangle, with point-scoring on both sides. Gordon Brown has courted popularity by offering a free (ie, tax-funded) service for people living at home

and requiring large amounts of personal care.

This undermines the Government's own plans for an across-the-board settlement with a consistent system for sharing costs between the taxpayer and the individual. The Conservatives have refused even to discuss long-term plans with other parties as long as one possibility – a tax on inheritance – is not ruled out.

The reality is that if older people are to get the care that they need and deserve, it has to be paid for somehow. The alternative is that in the years ahead, we will all be subject to huge private care bills, and many of us will face the humiliation, when we are frail, of

being "processed" by over-pressed carers in an underfunded system, rather than treated like human beings.

One thing that the parties do agree on is that in these days when funding from taxation is bound to be tight, the huge amount of wealth that older people hold in their homes could contribute to the cost. Committing to paying, say, 10 per cent of the value of your home when you die, rather than risking losing most of its value if you have to move into a care home, would seem an attractive form of insurance.

A key political debate is whether such a payment should be through voluntary insurance or a compulsory tax on inheritance. There are many reasons private insurance might not work – not least that the market has not so far provided attractive products.

There may be ways of improving the choices, and encouraging more people to insure themselves, or a compulsory system may prove the only feasible option.

Either way, our politicians need to show leadership by encouraging the public to face up to the fact that many of us will need expensive care, and if we don't make advance provision, whether publicly or privately, it will be more painful later on.

The good news is that a decent system of social care costs far less than the NHS, and the burden does not need to be too great, especially if we can spread the cost. I have recently set out a way of doing so, in a "viewpoint" paper written for the Joseph Rowntree Foundation with Philip Spiers, who runs FirstStop Advice for older people.

We propose that each generation makes a contribution to funding its own care costs. Today's older people would face a small levy on

inheritance, reflecting the fact that this generation has been able to build up a large amount of housing wealth, but has not made advance provision to pay for its care. However, the inheritance levy could gradually be phased out for younger generations, who could start paying in a different way: through a small levy added to national insurance, paid during their working lives.

This would build up into a fund that eventually makes the inheritance levy unnecessary. An essential feature would be to ensure that money from both levies was "ring-fenced" – genuinely allocated to paying for care rather than added to general taxation. If our politicians could sell such a deal to the public, their damaged reputations would deserve a huge boost.

Donald Hirsch is an independent consultant and writer on social policy.