Delivering Dilnot:

paying for elderly care

Delivering Dilnot: paying for elderly care

Edited by Paul Burstow

Delivering Dilnot Contributors:

Former Care Services Minister Rt Hon Paul Burstow MP, chair of
the Royal Commission on Long Term Care for Older People Lord
Stewart Sutherland, carer and writer Ming Ho and Dr Yvonne Braun,
assistant director at the Association of British Insurers (ABI).


The editor would like to thank Huw Cookson, Professor Andrew
Dilnot, Stuart Adam and Carl Emmerson from the Institute for Fiscal
Studies, Oliver Hawkins, Rachael Harker, Daniel Harari and Tom
Rutherford from the House of Commons Library. He would also like
to thank Jenny Ousbey for her research assistance.

Thanks must go to our contributors: Ming Ho, Gill Phillips and Joan,
Yvonne Braun, and Stewart Sutherland.

With thanks to the support of Jim Boyd, Chris Horlick and Caroline
Jackson at Partnership.

Copyright January 2013 CentreForum

All rights reserved

No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without the
prior permission of CentreForum, except for your own personal and
non-commercial use. The moral rights of the author are asserted.


Delivering Dilnot

: Contents


Executive summary

We expect better from government

Making the case for Dilnot

Catastrophic cost:
appalling, unjust and unavoidable

Care provision post-Dilnot

Good care + funding reform = bad politics

Care in the twilight: an ABI perspective

Policy recommendations and conclusions











Delivering Dilnot

: Preface

Chris Horlick, Managing Director, Care,Partnership

Partnership is delighted to sponsor CentreForum’s
publication ‘Delivering Dilnot: paying for elderly care’.

Partnership is committed to encouraging informed debate
and supports any constructive engagement which addresses
the core issue of how to fund long term care which we believe
is one of the great issues of our age. We recognise that it is
only by encouraging debate in this area that sustainable and
relevant solutions will be delivered.

The coalition government deserves great credit for all that
has been achieved so far on elderly social care – publishing
its Vision for Care, delivering the Law Commission report
on Care, the Dilnot Report and recently the Draft Care and
Support Bill. These are significant steps forward. However,
without a funding solution they will doubtless be seen as yet
another missed opportunity.

There is now universal agreement that there needs to be a
partnership between the individual and the state to fund care
and support. The financial services sector can only play its
part when it is clear what the state offer is. Further delays
in a settlement merely exacerbate the difficulties for service
users, their carers, families, providers and suppliers alike.

If successful government is about the art of the possible,
there are still some practical steps which can be introduced
to help the 50 per cent or more people in the care system


Delivering Dilnot

who have to fund all or part of their care, even in the absence
of Andrew Dilnot’s central proposals.

First, an education campaign to inform the public that they
may have to pay for their care was recommended by Dilnot.
Government should give citizens some idea of how much
care might cost, their chances of needing care and support
and for how long. An informed public at least has a chance
to plan and prepare.

Second, only self-funders face the risk of depleting all their
capital but only seven per cent of self-funders entering care
homes in 2009 received any financial advice. This absence
of advice contributes towards the 25 per cent of self-funders
who run out of money and fall back on the state costing an
estimated £1 billion each year in England alone. Now there’s
a contribution towards the costs of implementing Dilnot.

What these people need more than anything else is access
to properly qualified regulated specialist care fees advisers.
Advice on simple matters such as ensuring that non means-
tested benefits are secured to more complex funding
solutions such as releasing equity from their homes or
insurance products like immediate needs annuities which
can cover all care costs (including the so called catastrophic
costs) are available through the right advice. We believe that
a duty should be imposed on local government as part of the
Bill to refer self-funders for care to qualified advisers who
can help.

We hope that this report continues to stimulate much needed
debate and attention to this critical area – and help ensure
that it is not lost in the long grass.


Delivering Dilnot

: Executive summary

I had to sell my flat to pay for this care home so now I haven’t
got any choice – this is my home because it’s all I’ve got left…..1

Paying for care has been a long running sore in the social
care system.

But it is impossible to talk about older people’s care without
discussing how we might pay for it. This publication is
therefore intended as a useful contribution to the debate on
why the Dilnot Commission’s proposals are our best hope of
reforming care financing in at least a decade. This report will
also discuss how Dilnot could and should be paid for in the
fairest and most progressive way.

In order to produce a publication that encapsulates this huge
policy problem in all its guises, we have included original
pieces from expert figures. We have done so because it
was important for us to include the voices of those directly
affected by the lack of a resolution to care reform. These are
voices not often heard above the political din.

We have included heartfelt and poignant articles – one by a
90 year old who worries about her future, and another from a
carer whose life is dedicated to ensuring that her life, and that
of her dementia-stricken mother is not entirely destroyed by
a broken social care system.

We all know that care funding reform has reared its head
throughout successive administrations. This is why we asked
Lord Stewart Sutherland to provide the long-term overview
of the care debate. As former chair of the Royal Commission


An older person quoted in Bowers, Helen et al, Older People’s Vision for Long Term Care,
Joseph Rowntree Foundation, November 2009.


Delivering Dilnot

on Long Term Care of Older People, Lord Sutherland is best
placed to explain why Dilnot’s proposals are our best chance
at fixing a system buckling under demographic pressures.

Another key aspect of the debate over Dilnot has been the
speculation over whether the financial services industry is
geared up for delivering the products needed to insure people
against huge care costs. Yvonne Braun’s piece on behalf of
the Association of British Insurers is a welcome addition to
this publication. In her article she sets out the crucial role that
good financial advice can play in helping people to secure
peace of mind for the future.

Finally, the former Care Services Minister Paul Burstow MP
provides detailed analysis on what level Dilnot’s cap should
be set at, and how it should be paid for. It is rare that a
politician is willing to suggest that some may have to lose
out in the short term so that they can gain in the long term.

It is no coincidence that two of our contributors have used
the phrase ‘heads in the sand’ when referring to the historic
political and social unwillingness to solve this crucial issue.
This is why our publication sets out an overview of the
literature produced on Dilnot so far.

We have also conducted original research of our own which
has found that the argument for introducing a £50,000 cap
for those with modest assets is overwhelming. We have
revealed that someone with assets of £100,000 currently
faces losing 82 per cent of the value of those assets.

If the Dilnot proposals were introduced at a £50,000 cap,
the same individual would lose only 37 per cent. Indeed,
individuals who own an averagely priced property currently
face losing 65 per cent of their assets. Under a reformed
Dilnot system with a £50,000 cap and extended £100,000
means test – these people would only lose 22 per cent of
their assets.

Additionally, we establish which pensioners would be
affected by Dilnot, how much a cap of between £50,000
and £60,000 would cost, and what it would take to raise the


Delivering Dilnot

amount needed to pay for it.

We have proposed that the Winter Fuel Payment should
be linked to the Pension Credit. This would raise up to £1.5
billion a year while protecting the poorest against cuts in
their weekly incomes. In addition, by distributing the benefit
at wintertime as a lump sum, it would not only incentivise
those currently not claiming Pension Credit, but would be
clearly labelled as a payment for fuel.

We believe an additional annual pot of money, around £600
million, could be raised by establishing capital gains tax at
death. This means that in total the Treasury could save over
£2 billion a year to pay for a Dilnot care system at a cap that
would still protect those who so desperately need it.

It is true that Dilnot has only ever been part of the revolution
that needs to take place in social care. But with a draft Care
and Support Bill making its way through Parliament, and a
well-received Care and Support White Paper, some parts of
the jigsaw are already slotting into place. Yes, there is still a
gap in baseline funding for social care – but by implementing
Dilnot this pressure could begin to be addressed.

In the coming months we will discover if the voices of Joan,
of Ming Ho and of countless others have been heard by those
holding the purse strings on this decision. We can only hope
that their pleas do not fall on deaf ears for much longer. Now
is the time for action.


Delivering Dilnot

: We expect better from government

By Joan, 90, from Warwickshire

I don’t think I ever thought about needing long-term care. But
my friends started to go into care homes and apartments and
I was urged, by the family, to think about it. My daughter took
me to visit very nice places where people live in their own
flat and can mingle with others to chat or be entertained. But
I felt this was definitely not for me – at least for now.

My husband had absolutely no intention of moving home.
Perhaps it would have been better if we had gone somewhere
together. Moving is such a huge decision and, of course,
irreversible. At least one friend is not very happy despite
being in a comfortable, sought-after home. So I guess many
elderly people, like me, just put their heads in the sand and
get on with their lives!

The government should explain the necessity for saving
up, but many old people might not understand and could
be frightened by this. For most, it is too late to start saving
anyway when you retire. It would all have to be very carefully
handled. Could the government do it?

I think it is very unfair to have to use so much of one’s savings
and property to pay for care and I consider the means-tested
allowance to be ludicrously low. I read now that this might
increase in 2015 – three years away. At 90, three years is a
very long time indeed! I am very disappointed that this
government – as previous governments – talk so much about
this issue but have so little sense of urgency.


Delivering Dilnot

In the meantime, the lottery continues. Depending on how
ill you become, how long it lasts and how and when you
eventually die, the financial outcome ranges from “free of
charge” to “losing everything”. I don’t think there is even any
insurance you can take out to cover care home fees, certainly
at my age. You just have to try to stay healthy and hope!

I wonder if many people are even aware that social care is
not free. They will be very angry indeed when they are told it
is not. They will talk about the billions of pounds this country
sends abroad for overseas aid, some of which would appear
to be totally unnecessary.

I suppose all this applies particularly to people of my
generation (a diminishing number) who lived through the
horrors and deprivations of the Second World War. Younger
people have no idea what this was like and I hope they never
have to find out for themselves. But the war instilled in my
generation a culture of saving rather than spending, putting
others first and “making do”.

It is all particularly difficult as many older people struggle to
understand the value of money these days. For my first job, I
was paid “£2 17s 6d” per week. Today this would just about
buy a Costa coffee.

My generation have paid their taxes and saved hard for what
they now own and never asked for anything. We expect our
elected government to look after us better now.


Delivering Dilnot

: Making the case for Dilnot

by Jenny Ousbey

“In our view, the necessity for reform has never been greater.
While we accept that the economic circumstances have never
been worse, we remain of the view that this is a challenge which
will not go away. There is not a no-cost option.”2

Why Dilnot?

For some time concerns have grown regarding the funding
system for adult care and support in this country. Many
argue that it is not fit for purpose. Successive governments
have ducked and dived around the issue, placing it in the ‘too
difficult to do’ drawer. With strains on the current system
clearly visible, concerns of future cost increases and a
dramatic rise in the older population, it is safe to say that the
issue of care financing has reached crisis point.

The Dilnot Commission was set up in July 2010, following a
commitment in the Government’s Coalition Agreement, ‘Our
Programme for Government’. The independent Commission
was tasked by the Government to review the funding system
for care and support in England. Since publishing his report
in July 2011, Professor Andrew Dilnot’s proposals have
gained widespread support across the sector – and have
been debated extensively in and outside of Parliament.

The Dilnot Commission highlighted the shocking reality
that one in ten families will be hit with catastrophic costs of
£100,000 or more in their lifetime. Providing a safety net for


Richard Humphries, Senior Fellow (Social Care) The King’s Fund, Health Committee Oral
Evidence, Tuesday 19th June 2012


Delivering Dilnot

those who cannot pay for care is seen as an essential part of
the Government’s role in adult social care. But many feel the
state should go further to help better protect those who fall
outside the current means test criteria.

As consistently highlighted by the media, it is those with
modest wealth who lose out the most under the current
system. For example, those with assets of £80,000 can
face losing up to 80 per cent of their assets to pay for care
costs. This figure is even based upon an individual buying
residential care at the local authority rate and also being
able to meet their accommodation costs from their income.
In many cases, care costs will exceed local authority rates
and people are unable to meet their living costs from their
income alone, and so the depletion of their assets will be
much more severe. Often, recipients of care are left with no
assets at all after paying for the costs of care.

The Dilnot Commission was established to propose funding
options that could be sustainable for future needs, and would
allow people to better protect their assets, especially their
homes, from the cost of care.

Dilnot and demographics

The Commission’s proposals are about long term
sustainability and clearly projecting the demographic
changes over the coming decade will prove crucial. Clearly an
important consideration in the whole care financing debate
is the predicted changes to England’s demographic make-up
over the next 30 years. Those aged over 65 currently total
ten million, and this figure is expected to rise by a full 5.5
million within 20 years. However, if we specifically look at
those aged 80 plus (as this is the group most likely to require
care), this group will increase from 2.4 million in 2010 to 3.1
million in 2020 – a 29 per cent increase.

More significant is that by 2030 the over 80s will reach 4.5
million in number (an 88 per cent increase from 2010). In
terms of the impact this will have on social care services
in the future, we can be relatively confident that it will be


Delivering Dilnot

substantial. Indeed, by 2061 public spending will have to
increase by £80 billon in today’s prices due to the affects of
population ageing.3

And yet these rising age-related costs will be played out
against a backdrop whereby on average, pensioner net
income will increase by 0.5 per cent, while working families
with children will lose 1.4 per cent of their net income due
to the Government’s current reforms to the tax and benefits

It is within this policy and fiscal landscape that the politics of
how to pay for care and who should pay for it will be played
out. Ultimately there is cross-party agreement that the
state has a responsibility to ensure those who require state
support for care will continue to receive it generations down
the line. In turn this means there is no option but to reform
our current system of funding.

What are the problems that Dilnot is trying to

All of the below statements are taken from letters that Paul
Burstow received as Care Services Minister (names withheld):

“Dad worked from the age of fourteen to sixty eight. Even
when my brother and I were small he worked in the evenings.
Our family have never lived in a council house, claimed social
security or asked for help in any way from the state. My parents
did not take fancy holidays; they did not even own a car. What
will happen now?”

“My mum is happy because of the care she receive…I should
therefore, in this year of great celebration in our country be very
proud to be British, instead I feel angry and let down. We seem
to be able to fund and organise our Queen’s Jubilee as well as
the sporting event to end all. Conversely no one seems to be
able to fund and organise an eighty year old lady to end her days
in a place that, against the odds, she is happy in.”


Office for Budget Responsibility, Fiscal Sustainability Report, Table 3.6, Non interest spending
projections, in Paying for Ageing: Decision time for households and the state, Strategic Society
Centre, November 2012, p.9.
Joyce, Robert, Tax and Benefit Reforms due in 2012/13 and the outlook for household incomes,
Institute for Fiscal Studies, March 2012, p.10.



Delivering Dilnot

“To get the correct information as quickly and easily as possible
would take such a weight off everyone’s mind especially as they
are usually worn out, anxious, can be at the end of their tether,
under great stress trying to go through this minefield alone, just
muddling along….”

All of the above sentiments are strongly indicative of the
lack of information and support available to those engaged
with social care. This issue has been recognised in the draft
Care and Support Bill and White Paper – which establishes a
new information website across health and social care – as
well as a national minimum eligibility threshold for care. But
another topic of concern often raised by family members is
their loved ones’ unwillingness to talk or plan for the future
risk of needing long-term care. This lack of readiness to
plan and prepare is reflected in pension policy, as well as
social care. For example, research has shown that the over
60s’ estimates of their likely retirement income was some
£7,000 higher than they would actually receive.5 This trend
is reflected in carer and writer Ming Ho’s first person article
in this publication – where she points out that her parents’
unwillingness to discuss their care futures has left her
financially and emotionally drained.

What did Dilnot propose?

The Dilnot Commission made recommendations on how
to achieve a sustainable and affordable means of paying
for care costs. It proposed a combined contribution system
from both the users of care services and the state. The users’
contributions to their care costs will be ‘capped’, at which
point the state will pay the remainder of care costs above
and beyond that level. In reality, this means that a user’s
contributions will only be capped once the equivalent local
authority rate for care services has reached the cap, meaning
that the actual costs incurred by the recipient of care will,
in some instances, be higher than the cap. This issue is
discussed later.


Just Retirement, survey of 1,000 people, The role of housing equity in retirement planning,


Delivering Dilnot

The main purpose of the cap is to protect a larger proportion
of users’ assets from what is currently an unlimited liability.
Crucially, the cap introduces a degree of predictability and
certainty in a person’s potential cost liability. Currently
the only products tailored to cover long term care on the
market are immediate needs linked annuities offered by two
providers, Partnership and Friends Life.6 Therefore another
advantage of imposing the cap is to spark the creation of
financial products that cover the care market, so that people
can protect themselves against meeting the costs of care up
to the threshold of the cap.

Lastly, the Commission proposed raising the means test
threshold from £23,350 to £100,000 which would also offer
greater protection to those with modest assets. It would also
protect a far larger proportion of people’s assets and allow
them to better plan and prepare.

According to many, the overall effect of implementing
Dilnot’s principles means that local councils would know
in advance how much people have spent in care, thus
allowing them to realise the true cost of care and to make
preparations for this:

It also means more straightforward conversations and,
potentially, greater choice in services. For example, it is not
uncommon at present for someone paying the going private
rate for care to run out of cash and face having to move to a
cheaper care home which charges what the local authority is
prepared to pay.7

The Commission’s proposals will encourage people to
take responsibility for their future needs by encouraging
participation in the funding of care costs. Some have
countered that the system put forward by Dilnot merely
protects the richest pensioners, and yet this is to
misunderstand the fact that the proposals actually help
those with high care costs, regardless of personal wealth.




Delivering Dilnot

Have any alternatives been suggested?

The Dilnot Commission made it clear that a capped cost
system should be a comprehensive one. However, others
have proposed a voluntary scheme as a ‘cost neutral’
alternative, whereby users may choose to buy into the
scheme in order to benefit from the protection of a cap.

This policy emulates the principle of the Commission’s
proposals yet arguably undermines its ability to offer
protection to everyone and anyone facing high care costs. It
is clear a voluntary scheme would disproportionately affect
the less wealthy members of society who would be unlikely
to pay the premiums of an insurance policy, leaving them
to face catastrophic costs of care when they could least
afford it. Furthermore, Professor Dilnot has said there is
not “a country in the world” where an opt-in scheme had
successfully mitigated the fact that a minority would face
very high care costs8. An opt-in scheme would also mean
increased administration costs, with the old means testing
system running alongside a cap for the few who could afford
to pay the fee – in effect it would create a two-tier system of

Instead, what is required is collaboration between the state
and private sector. There is currently a very small long term
care insurance market in the UK. That market is the Immediate
Needs Annuity market. One of the key reasons why this
market has yet to grow to meet its potential is the belief
among a significant number of consumers that the NHS will
meet social care costs. For self-funders who make up 41 per
cent of the care system – it will not – and those consumers
will have to meet with social care costs themselves. This
confusion means that consumers fail to plan appropriately
to fund their care.

There is also a chronic lack of awareness among consumers
about their likelihood of needing care; how long they will live
in care; what the cost of care is; where to get advice to fund
social care and what financial products are available to meet


Financial Times, Campaigners Left Disappointed on Social Care, July 11 2012, Sarah Neville


Delivering Dilnot

the costs of long term care.

But if reform was easy, it would have been done by now.
Labour failed in its 13 years in power to make progress.
Tony Blair’s Royal Commission, led by Lord Sutherland
ended in the Government taking no action to implement its
proposals.9 Then, Labour’s last ditch attempt, at the end of
their administration, of a compulsory levy on estates was
dubbed a ‘death tax’ and has never seen the light of day
since. Later on in this publication Lord Sutherland provides
some insights into why care has often been kicked into the
long grass by successive administrations.

Certainly the care and support sector has positioned itself
firmly behind a universal approach along the lines proposed
by the Dilnot Commission. This form of scheme would allow
the private sector to do what it does best, to innovate and offer
families affordable ways of financing their care costs up to
the cap whilst ensuring the state manages the unpredictable
and unaffordable costs the user is currently ensnared with.

How is Dilnot perceived?

The Commission’s proposals were perceived as a ‘game
changer’ in care funding, a long-overdue contribution to
the problem. In short, Dilnot received a positive response
from the care sector. The sector particularly praised Dilnot’s
proposals in terms of the protection and security they
offer older people who currently face losing a significant
proportion of their assets to pay for care costs in later life.
The proposals were also highly regarded in their efforts to
maintain the Government’s commitment to providing free
care for the poorest in society.

There has, however, been much debate over how far the
financial services industry backs Dilnot’s proposals. Some
argue that if pre-funded long-term care insurance products
were reintroduced by 2015 (and assuming the average age of
the claim was 75) and saw a 6.25 per cent take up amongst new



Delivering Dilnot

retirees, it would be 2025 before the insurance industry would
begin directing money into an over-burdened care system.10

As James Lloyd, of the Strategy Society Centre writes about
the pre-funded insurance market:

“Insurers can only price care insurance policies on the basis of
trends in disability and longevity. But in addition to length and
level of disability, under the ‘capped cost’ model, a person’s
£35,000 liability is determined by the availability of informal
care, and how much a council gives individuals with a defined
level of need. These are not things that insurers can price for…”11

But others believe the financial services industry is more than
willing to create the right kind of products, as long as the
Government is able and willing to set out a clear framework
of its plans. For instance, the Association of British Insurers
has been very clear that it believes Dilnot would stimulate
the creation of long-term care products – as Yvonne Braun
emphasises in this publication.

However, the Coalition Government’s response to Dilnot has
by no means been unified. In the progress report on funding
reform, published in July 2012, the Government agreed with
the principle of the Commission’s model, financial protection
through capped costs and that an extended means test would
be the best means of achieving a system that is suitable for
future needs. However, the progress report raised issues of
affordability and put plans on hold until the next Spending

This was perhaps an unsurprising response given the context
of frozen budgets and deficit reduction plans across Whitehall.
But what the Government’s progress report did was to show
that Dilnot did indeed represent a sustainable option for the
future of our care funding system.

Recent media reports, particularly over the summer of 2012,
suggested that the Government and particularly the Prime
Minister were ready to announce reforms along the lines of


Written Evidence to the Health Select Committee from the Strategic Society Centre, SC80,



Delivering Dilnot


The Prime Minister and Mr Clegg both want to announce this
autumn that they will implement the Dilnot recommendations in
order to put the Coalition back on track. They plan to insert the
pledge to enforce the proposals in 2017 into the Government’s
Care and Support Bill. They see it as a key legacy project for the
Government that will show the two parties working together to
solve a major problem that affects millions.12

And yet these sentiments are still to come to fruition.
The Government remains uncommitted to seeing the
Commission’s proposals implemented. This is not an
issue of affordability, but one of political and economic
will which requires a multi-spending period decision, as
argued by former Care Services Minister Paul Burstow in his
contribution to this pamphlet.

Who will it help?

The Commission’s proposals have the potential to benefit
everyone in society. While it remains the case that not
everyone will require care and support in their later years,
more than eight out of ten people aged 65 or over will.
However, whether we will require care in our lifetime largely
remains out of our control. The purpose of the Commission’s
proposals is to rid the public of their anxiety that they may
one day face paying the crippling costs of care. But not only
do the Commission’s proposals protect the high costs of care,
they also go further to protect assets due to the increased
means test threshold.

The current system is such that if assets are in excess of
£23,350 then the user must meet the entire cost of their
care needs, whereas under a reformed system the threshold
would rise to £100,000, which would afford protection to
those with modest assets as well.

The Commission’s proposals would also significantly help
those who require long term care from an early age. For
example, those entering adulthood with a care and support



Delivering Dilnot

need would immediately qualify for state support rather than
being subject to means testing. This would offer enormous
benefits to those who currently require care from an early
age, and are required to pay for it from their salary or social
security payments:

This will make a massive difference to disabled people who are
often impoverished by huge charges for services13

It is also the case that those with long-term degenerative
diseases such as dementia would benefit from Dilnot’s plans.
Indeed, as Paul Burstow outlined in a letter to the Prime
Minister on 19 October 2012:

You have rightly challenged the country to be more dementia-
friendly. Yet while care financing is left unreformed, people with
dementia face the prospect of losing both who they are and
everything they have worked for. It is no wonder care fees are
often called a dementia tax.14

We will offer a more detailed analysis of who Dilnot will help
in terms of asset and income wealth later on.

What will it cost?

Recent discussion has centred on what the level of the cap
should be. It is clear that the Treasury believe that a cap at
£35,000 would be too expensive for the state to be able to
meet the demands of a growing ageing population. Instead,
(as Paul Burstow will set out in this publication) a cap of
between £50,000 and £60,000 represents a more realistic
figure that will allow the Commission’s proposals to remain
sustainable in the future as demand gradually increases.

Professor Andrew Dilnot is also thought to believe a cap of
around £55,000 would be optimal:

“Having a cap of around £50,000 to £60,000 might be the optimal
point between making financial solutions more affordable and
stimulating demand.”15




Delivering Dilnot

A cap of £35,000 is estimated to cost £1.9 billion by 2018/19
– compared to a cost of £1.3 billion for a cap of £50,000 in the
same year.16 In turn, a cap of £60,000 would cost around £1
billion but some argue it would fail to protect those at risk
of high levels of care in older age.17 This cap should also be
linked to a means test threshold of £100,000, as was proposed
by the Dilnot Commission. This would ensure that a greater
proportion of one’s assets are better protected than they
are under the current system since they would only become
liable for their care costs when their assets exceed £100,000
in value, rather than at the current threshold of £23,350.

One of the great myths in the funding debate is the allegation
that the state would be burdened by the entire cost of Dilnot
(£1.7 billion for example) from the outset. But this is simply
not the case. The introduction of any policy could not be
retrospective; so from the date the policy begins the levels
at which users contribute to their personal care costs (up to
the cap) begins. This would mean that many people paying
for care would not be eligible for state support from the start;
it would be a gradual process by which people met the costs
of care until they reached the cap or the value of their assets
fell below the means test threshold of £100,000.

A cost implication which has not been discussed in enough
detail in the media is the actual costs incurred by the user.
The proposed cap is set at what the user accrues in care
costs as if they were receiving council-supported care. In
designing the new system careful consideration will need to
be given as to what counts as an eligible and realistic care
cost and how those costs are metered in a way that is fair to
all. The rate at which someone progresses to their cap will be
based on the assured cost of providing care to meet eligible
needs. This figure is likely to be lower than the actual costs
incurred, and therefore meaning that a person receiving care
could spend more than the cap.

For example, if X pays £500 per week in residential care fees


Caring for Our Future: progress report on funding reform, July 2012, see table p. 33
Oral Evidence to the Health Select Committee on July 17, 2012 www.publications.parliament.


Delivering Dilnot

and the council limit for care is £300 per week, then X will
continue paying until the council limit of £300 has reached
the cap of for example, £50,000. Therefore the cap is not
the user’s spending total, it is the total spend of the council.
If X then continues to want to receive the more expensive
care option after the cap has been reached, then X will face
paying the difference, in this instance £200 per week.

This ensures that the state pays equally to all who receive
care. It also allows those receiving care to benefit from more
expensive services should they wish to pay for them. A
policy of this nature, where costs are foreseeable, allows the
private sector to produce financial products that can meet
the costs of care beyond the council limit, and the costs of
care beyond the national cap.

Another factor is that the cap will only apply to the costs of
care, and will not include accommodation costs, dubbed
“hotel costs”. This is an important aspect of the Commission’s
proposals that have been overlooked in the funding debate.
But this is not a new addition to the discussion on social care
funding, since this proposal reflects the conclusions reached
by Lord Sutherland’s Royal Commission. The rationale of
the decision not to include accommodation overheads is
that there is a responsibility on the individual to meet these
costs. However the Dilnot Commission recommended they
be limited to between £7,000 and £10,000 per year.

Lastly, the costs of care, and thus the costs to individuals
under a capped costs model will be likely to change for a
number of reasons. For example, inflation will lead to future
costs being higher than they currently are. The Commission’s
proposals were made on the basis of 2010/11 prices (and the
Government’s calculations are based on 2012/13 prices), and
so figures for future costs are likely to be higher. This will
mean that a cap will change over time to reflect the increased
costs that will affect the receivers of care.

How do we pay for it?

There have been numerous suggestions over how the


Delivering Dilnot

Commission’s proposals could, or should be, paid for.

A report published by Saga in June 2011 looked specifically
at proposals for the type of system that should be in place,
in order to provide an ageing population with proper access
to care.18 The report investigated various funding options
such as ‘pay for yourself’ schemes, ‘insurance’ and ‘tax
funded’ initiatives. Other options included a ‘comprehensive’
scheme whereby compulsory payments from older people
who possess the means formed the main source of funding
for adult care services. The report drew on the experiences
of various countries including France and the USA, and
concluded that no single funding option would be suitable.
Instead, a system that combined aspects of more than one
system would provide the optimum solution. But Saga also
concluded that the appropriate funding model would depend
on the concerns and desired outcomes of the individual.
For example, those who value simplicity and transparency
might prefer a tax-funded system, whereas those for whom
affordability is the predominant concern, might prefer the
current means-tested system or the ‘pay for yourself’ option.

In a report by the Institute for Fiscal Studies, numerous
options were considered as potential sources to meet the
added costs of implementing the Dilnot Commission’s
proposals.19 Options included imposing National Insurance
Contributions on the employment income of pensioners, or
upon pension income generally. Another possible avenue
included restricting tax relief on pension contributions, but
this would realistically involve significant and complicated
administration costs and would work in such a way that it
would disproportionately affect higher rate tax payers.

A similar proposal sought to reduce the current generosity
of the tax treatment of pensions, which currently allows
individuals to take 25 per cent of their pension pot as a
tax-free lump sum. Yet there are problems with such a
proposal, such as the possibility of it being able to realise


Saga, Take Care: The Future of Social Care, June 2011
Institute for Fiscal Studies, Pensioners and the tax and benefit system, IFS Briefing Note
Billion130, 2012


Delivering Dilnot

any significant savings, and the disruption it would cause in
terms of people’s current retirement plans.

Another proposal from the IFS that would be well targeted on
the wealthiest on society would be to impose capital gains
tax at death, something which is currently not realised. Such
a proposal would be capable of targeting those pensioners
in the richest income brackets in the country. We will explore
the implications of making such a change later on in this

A report published by the Personal Social Services Research
Unit in December 2011 offered a new angle on the funding
debate.20 It proposed a system where, unlike the ‘capped’
model as proposed in the Dilnot Commission, protection is
offered to the users of care services by increasing both the
lower and upper capital limits. The report termed its system
as “means testing plus”. It is different to the current system
in that it recommended merging the lower and upper capital
limits of the current system into one single capital limit. This
would then embody a limited liability system by constraining
asset depletion to a certain level. The report proposed that
a new single capital limit could be set at £150,000, which
would cause maximum rates of asset depletion in the current
system to fall significantly. It also claimed that maximum
rates of asset depletion can be below those rates projected
for the capped risk model in some cases.

However, a system that relies on a capital limit raises issues
regarding calculating a person’s asset worth, for example
the difference between housing and non-housing assets and
which of these would be included. Furthermore, increasing
the lower capital limit does not afford protection to people
in terms of the absolute amount they spend. For example,
someone with £800,000 of assets and a low income could
still potentially end up paying £200,000 in care costs.

Others have suggested that the solution to pay for Dilnot
already resides in the current system. In a report from the


PSSRU, Funding social care for older people: The implications of extending the current means-
test, December 2011, A report funded by BUPA.


Delivering Dilnot

Nuffield Trust, options proposed for funding a reformed
system include using part of the £1.5 billion NHS underspend
and reviewing the balance of spending across health, social
care and welfare payments.21 This latter suggestion not only
includes shifting some of the health budget toward social
care, but also using money spent on welfare benefits for
wealthier older people such as Winter Fuel Payments to pay
for care.

In the Wanless report on long term trends affecting health
care, it was stated that “no review of health care resources
would be complete without considering the link [with social
care]”.22 Whilst this is a fundamental issue that must be
given more consideration in the future, we would argue any
remaining NHS budget should be re-invested to provide better
social care and to meet existing baseline funding pressures,
rather than paying for implementing a new system.

Albeit politically sensitive, the proposal to pay for Dilnot
by restricting age related universal benefits is one that
many believe has merit. Indeed, at times it has appeared
to have garnered cross party support despite the Coalition
Government’s promise not to touch this form of benefits in
this Parliament:

If you’re faced with a choice in terms of helping the wealthiest
pensioners or helping the vulnerable across Britain, then
his [Nick Clegg’s] priority is the vulnerable people across the
country who need the most help,”23

“There are lots of anomalies in the benefits system. We could
go almost anywhere to some of the universal nature of some of
these benefits.”24

But others argue the withdrawal of universal benefits from
wealthy pensioners would punish those who were reluctant
to apply for benefits in the first place.


Nuffield Trust, Reforming Social Care: options for funding, May 2012
The Wanless Report, Securing our Future Health: Taking a Long-Term View, April 2002

Iain Duncan Smith


Delivering Dilnot

“If you start means-testing pensioner benefits, many of those
who need help will not get it, as they won’t claim, it will cost
huge sums in administration and you will be penalising those
who have saved.”

At its core we would argue this method of paying for care
financing reform appears to spread the burden across those
who are more wealthy and able to pay for their own care.
According to the IFS, linking Winter Fuel Payments to those
claiming Pension Credit would save the Treasury at least
£1.5 billion every year.

Research findings

In the past 18 months or so the Dilnot Commission’s
proposals have been hotly debated. Policy papers, articles
and reports have often been written from very different
perspectives – that of economists, older people’s experts
and media pundits. What we wish to make clear from the
very start is that our contribution is very much in the vein
of a political commentary on what has gone before. In our
research we have also aimed to nail down practical answers
to questions posed by others – in order to formulate a viable
policy solution to care financing.

We used a variety of sources in collating the information
for this publication. We have analysed previously published
data from think tanks, data published by the Institute for
Fiscal Studies, and we have conducted our own research in
collaboration with the House of Commons Library.

As has been detailed in the Coalition Government’s progress
report, a capped system will vary in expense, depending on
the level at which it is implemented.26 Factors such as the level
of the cap, the level of the upper capital limit, and the level
of contribution made by those receiving care towards their
living costs will all determine the total cost to the taxpayer.

Dr Ros Altmann of Saga25

Caring for our future: progress report on funding reform, July 2012


Delivering Dilnot

What would be the cost of a £50,000 cap in 2015?

The debate surrounding a reformed capped model of care
funding has evolved on the presumption that implementation
would lead to a £35,000 cap. This is due to the fact that
the Dilnot Commission’s report used £35,000 as the basis
of its cost projections. However, this figure was not an
endorsement by the Commission as to what represents a
fair and appropriate figure. Instead, it corresponds to a mid
point between what the Commission proposed, which was
between £25,000 and £50,000.

It is important this debate can move on from this assumption
because we argue the cost implications of a cap at £35,000
would be unaffordable in the current economic climate. The
Commission’s calculations were based on prices of care in
2010/11, meaning that by the time the policy is introduced,
in 2015/16 for example, the cost of the cap would not reflect
a sustainable cap for the future given the inflated costs of
care five years on. A crucial misunderstanding by some in
the funding debate is the presumption that a cap represents
a fixed maximum price that people would pay for care for
years to come. In reality though, as prices rise and as inflation
devalues the currency, the level of the cap must adjust to
recognise these facts.

What would people gain with a £50,000 cap?

Figure 1 (overleaf) illustrates potential asset depletion by
comparing the effects of the current un-capped system to
a range of Dilnot type capped schemes with an extended
means test threshold.

We have obtained a detailed breakdown of the graph which
includes a cost implication for each cap at £5,000 intervals of
asset value. This information is available for the first time
in Hansard, but we will detail some of the main findings

This graph is based upon someone receiving eight years


Hansard, 17 Dec 2012: Column 631W


Delivering Dilnot

Figure 1: Proportion of assets depleted under the current
system, and under a capped system



Indicative asset depletion (%)







Source: Caring for our future, progress report on funding reform, July 2012, Figure 14, p.36

of residential care at a cost of £150,000, plus £10,000 per
annum towards their general living costs. It assumes that
the individual has purchased their care at the local authority
rate, meaning that someone paying a higher rate for their
care could spend more over their lifetime. It also assumes
that the individual can pay the £10,000 per annum living
costs from their income, meaning that estimates will differ
for people with higher or lower incomes.

What is most striking about our findings, is the huge benefits
that are afforded to individuals if care costs were capped at
£50,000 and the means test was extended from £23,350 to
£100,000. For example, someone with assets of £100,000
currently faces losing 82 per cent of the value of those assets.
If the Dilnot proposals were introduced under a £50,000 cap,
the same individual would lose only 37 per cent.

Indeed, the Department of Health figures clearly demonstrate
who is likely to lose the largest proportion of their assets

Current system







Assets on going into care




Top quintile




Delivering Dilnot

under the current system. The breakdown indicates that
those with assets valued at £165,000 to £170,000 would
lose 87 per cent, compared with 33 per cent under a £50,000
cap. This information, which has not been available before,
clearly shows the ability of the proposed reforms to benefit
everyone in society, whether they own substantial or modest

It would also be useful to consider the effects of a cap in
relation to the average price of a house in the UK, which as
of October 2012 was £231,000.28 Under the current system,
individuals with assets of this value would lose 65 per cent,
whereas under a reformed £50,000 cap would lose only 22
per cent.29

Who can pay and how?

Funding options are available to the Treasury. Whether the
capped system is introduced is a matter of political will, not
resources. We are therefore not the first to question the
sustainability of paying benefits such as the Winter Fuel
Payment on a universal basis. Various charities and think
tanks have also questioned whether, in an era of austerity, it
is right that state support is given to those who do not need or
even ask for it. Instead, the value of universal benefits could
be used to alleviate an enormous problem in our ageing
society, for the benefit of everyone. This is an issue that all
sides of the political spectrum have raised. We therefore
believe it is a matter of ‘when’ and not ‘if’ universal benefits
are reformed to better target those who truly need them.

It is worth bearing in mind that these are considerations to
be taken against a backdrop that sees pensioners nowadays
receiving their highest incomes since 1961. Indeed, we can
see that pensioners are faring relatively well, compared to
other groups, as a result of austerity measures (see Figure 2).

Based on assets valued at £230,000.



Delivering Dilnot

Figure 2:

Losses from tax and benefit changes to be
introduced between January 2011 and April 2014,
by income decile group and household type,
without Universal Credit

Households with children

Working-age without children



Poorest 2


Loss as a percentage of net income








Source: Pensioners and the tax and benefit system, IFS Briefing Note BN 130, 2012, p.12







9 Richest


Figure 2 shows that the poorest working age households
with children are being hit with a seven per cent cut in
income, while the poorest pensioners are experiencing a 0.5
per cent cut. That compares to a drop of under three per cent
for households with children on an average income, and a
drop of two per cent for pensioners of an average income.30


It must be noted that these figures do not take account of other policies across Government.
For example, the Liberal Democrats initiative to raise the income tax threshold, and the effects
of triple lock pensions will likely alter these results.


Delivering Dilnot

Figure 3 – Distributional impact among pensioners of means
testing Winter Fuel Payments



Annual cash loss
(left axis)



Loss as a % of income
(right axis)






Annual cash loss (£)



Percentage income





Source: Browne, James and Johnson, Paul, Options for raising revenue to pay for long term
care, Institute for Fiscal Studies,

How much money could be saved by restricting Winter
Fuel Payments to those in receipt of Pension Credit?

We would argue that the Winter Fuel Payment (WFP) is an
anomaly in our welfare system. It targets many who do not
need financial assistance to heat their homes and it fails to
properly help those who do.31 Anyone of pension age receives
the benefit, and yet most people who live in fuel poverty are
not pensioners. Research has shown that only 12 per cent of
the money distributed by WFP is actually spent on fuel.32

Furthermore, research suggests that there are as many
recipients of WFP in the top income decile as there are in





Delivering Dilnot

the bottom. Furthermore, there are over 100,000 households
with an income above £100,000 that receive this payment.33
More importantly however, is the failure of WFP to take
people out of fuel poverty status, a status achieved when a
household spends over 10 per cent of its income on energy.
For example, if a household spends £120 a month on energy,
out of an income of £1,000, then they have spent 12 per cent
of income on energy. If you then raise the household income
by £25 (in the same way that WFP increases income) the
household still spends 11.7 per cent of its total income on
energy, meaning they remain in fuel poverty. However, if the
£25 is spent on cutting their energy bill, the same household,
earning £1,000 per month spends 9.5 per cent on energy,
taking them out of fuel poverty.

In short, WFP is ineffective and works as a universal income
boost for all over sixties, and not as a means of targeting
help to those who need it most (see Figure 3 above).

The universal eligibility for, and the automatic payment of
WFP means that take-up is very high. The cost of WFP was
£2.1 billion in 2011/12, paid to over 12.7 million people.34
Therefore on a strictly proportional basis, £500 million could
be saved every year if WFP was not distributed to 23.3 per
cent, or 2.94 million people. In February 2012 there were
2.06 million people claiming Pension Credit. On this basis we
can deduce that if WFP was limited to those people claiming
Pension Credit only, over 10 million people would lose this
benefit, leading to savings to the Treasury that would exceed
£1.5 billion annually.

However, it is crucial that this proposal would not leave those
who are not receiving Pension Credit in a position where
they are unable to meet the costs of heating their homes.
At current levels, the take-up of those receiving Pension
Credit is two thirds of those eligible. We must therefore
consider why a third of people entitled do not claim Pension
Credit. Research by the Department for Work and Pensions


Policy Exchange, Cold Comfort: Fuel Poverty and the Winter Fuel Payment, p.16, March 2010
DWP, Annual Report by the Secretary of State for Work and Pensions on the Social Fund
2011/12, July 2012, para 2.16


Delivering Dilnot

suggests numerous reasons. Firstly, people misunderstand
their entitlement to the benefit, especially homeowners. For
example, 78 per cent of those who were entitled to Pension
Credit but not receiving it owned their own homes, whereas
15 per cent of those entitled but not receiving lived in the
social rented sector. Subsequent research by the DWP
suggests that a lack of awareness as to entitlement is one of
the main reasons why people entitled to Pension Credit are
not receiving it.35

Yet, this fact does not necessarily determine the wealth
status of those not receiving Pension Credit, especially those
who are entitled to receive it, but do not claim. The research
by the DWP suggests that 50 per cent of those entitled to
claim but not receiving were entitled to £20 or less per
week, and 76 per cent were entitled to £40 or less per week.
The report states that, “this supports other findings where
pensioners’ prevalence to claim is affected by the amount
they are entitled to.”36

Therefore our policy proposal would help this lack of take-
up from those on the cliff edge by incentivising those who
are entitled to Pension Credit but not receiving it, to make
a claim. By adding the value of WFP to Pension Credit, and
distributing it into people’s bank accounts at wintertime only,
we would target this payment to those who need it, while
removing it from those who do not. By incorporating WFP
to Pension Credit, we would encourage a group of people on
low incomes to claim Pension Credit.

There has been some discussion that the labelling of WFP
has been beneficial in terms of it targeting fuel poverty.37
As a result this could mean that merging it into the Pension
Credit would be detrimental. However, not all studies reveal
such a labelling effect, and despite its labelling the majority
of WFP is still not spent on fuel by pensioners.38


DWP, Pension Credit Eligible non-recipients: Barriers to claiming, Research Report 819
DWP, Income Related Benefits: Estimated Take-Up, p.56, February 2012.
Beatty, T. et al, Cash by any other name? Evidence on labelling from the UK Winter Fuel
Payment, Institute for Fiscal Studies, 2011.
Walker, I. Cold comfort?, The Warwick Magazine, University of Warwick, Spring, 2006.



Delivering Dilnot

So how much funding for Dilnot would this policy raise? For
the purposes of this report, if we assume that our projected
take-up rate of Pension Credit improves to 100 per cent from
two-thirds currently, then there will be circa three million
people claiming the benefit with the added value of the
WFP. This would mean that around three-quarters, or nine
million people would lose their entitlement to WFP, leading
to savings for the Treasury of approximately £1.5 billion. We
therefore propose to limit WFP to those on Pension Credit.
This will mean that WFP will be abolished, and the value of
the benefit will be added to the value of Pension Credit.

How much money could be saved by restricting free
TV licences to those receiving Pension Credit?

In our analysis of universal benefits we also calculated the
potential savings that could be achieved by limiting free TV
licences, which are currently given to the over 75s, to those
claiming Pension Credit. In 2010-11 there were 3,929,753 TV
licenses issued to people aged 75 or older at a value of £145
each.39 Therefore, in order to raise an additional £500 million
it would be necessary to remove 86 per cent, or nearly 3.5
million of the free TV licences currently being issued. We
therefore felt that limiting TV licences to those receiving
Pension Credit would not raise sufficient extra revenue to
justify the disruption and cost to so many elderly households.

How much money can be raised by ending the relief
on Capital Gains Tax currently given to certain
assets bequeathed from one individual to another
upon death?

We have explored charging Capital Gains Tax (CGT) on
death – a proposal originally put forward by the Institute for
Fiscal Studies.40

The current system is such that when an asset is bequeathed
to another at death, any capital gains that have accrued up
to that point are exempt from CGT. When the recipient then


HC Deb 8 Nov 2011 C194W
IFS, Pensioners and the tax and benefit system, Briefing Note Billion130, 2012


Delivering Dilnot

comes to sell that asset, the base price is taken as the value
of the asset at the point they inherited it rather than the
original price. HMRC estimates that this relief is worth £0.67
billion annually.41 Crucially, assets including an individual’s
primary residence, bank accounts and ISAs are not subject
to CGT, meaning that only those with substantial holdings
of property or shares outside an ISA would be affected by
abolishing this relief.

Figures released by HM Treasury show that 38,000 estates
would be affected by abolishing this relief, 66 per cent of
which would be valued at over £300,000. This would therefore
target capital gains tax towards more estates with significant
assets, who would in return benefit substantially from the
reformed capped system on care funding.

This proposal will attract criticism from those who believe it
is a double taxation on assets, from both CGT and inheritance
tax. But this issue could be limited by not charging CGT on
the initial transfer of the property. One proposal is that such
assets could only become liable for CGT when they are sold,
thus removing the apparent ‘double taxation’ that might
otherwise occur at the point of transfer. A report by the IFS
puts this argument more starkly:

If policymakers do not accept the argument for taxing transfers,
then they should not tax them: simply abolish inheritance tax.
But if there is an argument for taxing transfers, that must be on
top of the regime for taxing returns to capital.42

Therefore we would propose abolishing forgiveness on
capital gains tax at death. This measure would target only
the wealthiest, as it is a tax that only applies to gains over
£10,600 – with gains from banks, ISAs and primary homes
not included.

As the calculation for CGT liability is so case specific, as it
depends on income and various allowances, it is impossible

Institute for Fiscal Studies, Mirrlees Review: Reforming the tax system for the 21st Century,


Delivering Dilnot

to calculate exactly who would be affected by this measure.43
However, as the sale of a second home is the most likely
trigger for this liability, a small minority of the wealthiest
would be affected by this measure. For instance, it is
estimated that only 2.8 per cent of people in the UK own a
second home.44

Additionally, the benefits of such a measure would not
only be contributing a large chunk of the annual funding
for care financing reform, but also correct a ‘distortionary
system’ whereby the absence of the tax at death encourages
people to hold onto assets rather than sell them to reinvest

Some, such as Carl Emmerson from the Institute for Fiscal
Studies, have argued that this kind of measure would
marginally affect the incentive to save – but the benefits in
terms of contributing towards a fairer and more sustainable
system of funding care are harder to ignore.46


The HMRC gives a simple example of how CGT is calculated under current rules: Mr P’s total
income, after deducting allowances and reliefs, is £20,000 and his capital gains, after reliefs,
are £15,000.
The basic rate band is £35,000. Mr P has used £20,000 of this amount against his income – so
has £15,000 remaining.
As his gains are only £15,000, he has enough of the basic rate band remaining to cover his
gains, so they are all to be taxed at 18 per cent. He now deducts his tax-free allowance of
£10,600 and pays Capital Gains Tax at 18 per cent on £4,400.
Comments made during a presentation at an event hosted by the Strategic Society Centre at
the British Library, November26, 2012.




Delivering Dilnot

Summary of conclusions


We agree with the Institute for Fiscal Studies that
the relief of Capital Gains Tax at death should end.
The current relief is a distortion in our tax code that
is not justified, and it is a measure that would raise
£600 million a year towards implementing Dilnot’s
We propose ending the universal entitlement to
Winter Fuel Payment and to instead link receipt of
this benefit to those who receive Pension Credit. This
would create savings of up to £1.5 billion each year –
which we propose should be spent on reforming the
financing of care.
This policy would incentivise those entitled to Pension
Credit but not receiving it, to begin claiming – as we
would merge the Winter Fuel Payment into Pension
Credit, paying it as a lump sum at wintertime.
We believe that a cap of between £50,000 and £60,000
in 2015 prices is the most appropriate level of a
capped system of care funding. This cap will work
in conjunction with an increased upper capital limit
of £100,000 and would ensure a fair and sustainable
system of care financing.
Our research demonstrates that the argument for
introducing a £50,000 cap for those with modest
assets is overwhelming. We have revealed that
someone with assets of £100,000 currently faces
losing 82 per cent of the value of those assets. If the
Dilnot proposals were introduced at a £50,000 cap, the
same individual would lose only 37 per cent. Indeed,
individuals who own an averagely priced property
currently face losing 65 per cent of their assets.
Under a reformed Dilnot system with a £50,000 cap
and extended £100,000 means test – these people
would only lose 22 per cent of their assets.






Delivering Dilnot


Catastrophic cost:
appalling, unjust and unavoidable

By Ming Ho, writer, script editor and member of Uniting
Carers, Dementia UK

My mother is 86. A former singer and teacher, widowed
since 1988, she is a fiercely proud woman, who hates to be
‘beholden’. For as long as I can remember, she said, “Never
put me in a home!” But last year, I was heartbroken to do
exactly that.

She has dementia. More than a decade ago, I gave up a
full-time job to go freelance, thinking that would give me the
flexibility to care for my mum; an only child with no other
immediate family, I struggled for years to keep her safe and
well in her own home, while shuttling back and forth 100
miles to mine. I spent more and more time attending to her
increasing needs, while falling out of circulation myself. A
common pattern for carers.

Mum, meanwhile, continued to believe that she was 100%
independent. Lack of awareness – the inability to recognise
one’s own incapacity – is often a feature of cognitive disorders;
families can find this extremely hard to raise with the person
concerned and hence with the authorities. Consequently,
many who live with dementia are never diagnosed – and
diagnosis is key to support.

We had no outside help at all until 2009 when I had to go into
hospital and alerted mum’s GP and social services. Friends
and neighbours did whatever they could and bailed us out of
numerous crises in the ensuing years. At my own expense, I


Delivering Dilnot

covertly engaged an independent carer a couple of times per
week, in the hope of increasing this to daily.

But it wasn’t enough. By 2011, mum couldn’t be left alone
for even a minute, with me in just the next room: short-term
memory loss made her feel constantly abandoned. She was
plagued by frightening delusions and often hyperactive at
night – which meant that neither of us slept. She forgot to eat
and no longer recognised the house where she had lived for
40 years; and when she had to be brought home one night
by the police after wandering in distress, I knew she needed
round-the-clock care that I alone could not provide.

Had she made provision for this? No. She came of age in the
dawn of the NHS; if she ever considered funding, she would
have believed that National Insurance provided equally to all.
In the days when she had capacity to plan, she could never
have foreseen the vast increase in demand on the state nor
the shocking tariff of residential costs today. And she never
thought they would apply to her.

Her own parents died in their early seventies from acute
conditions; she had never been faced with long-term care
arrangements for them and was adamant she herself
would not choose residential care. She never imagined the
circumstance in which choice became necessity.

I am a pragmatist, who prefers to deal with a worst case
scenario head on; my mother, however, is not. Twenty-four
years ago, when my father died, I tried to broach the issue
of finance with her. Inheritance tax planning, for instance,
might have helped us now. But as the Dilnot report points
out, some people, like my mother, avoid confronting the
unpleasant facts of life. Power of attorney, tax planning,
end of life wishes – all remained taboo. And now she lacks
competence to make decisions.

So when she needed residential care, sole responsibility fell
to me. I was lucky to find a place in an excellent specialist
unit – the only suitable one. But with the current asset
threshold for state funding set at £23,250, anyone who owns
their own home is not eligible for any contribution, no matter


Delivering Dilnot

how extreme, long-term, or costly their need. I had to make
private arrangements at short notice; and without legal access
to my mother’s funds at that time, I was personally liable for
£4,000 per month, plus deposit and incidental expenses.

It took four months to finalise a Court of Protection order
appointing me as Deputy to manage her affairs; until then, I
had to cash in savings of my own to meet her care and legal
costs. When the order was granted, I was reimbursed from
her accounts.

But with ongoing fees of nearly £1,000 per week (by no
means the highest tariff), her income falls short by 50 per
cent. Each month I have to raid her savings and investments
to make up the difference, and have spent a year clearing out
her house for sale, as part of a fortnightly 200-mile round
trip. Her residential care costs to date (just 14 months) have
already exceeded £50,000.

That excludes maintenance, insurance, and utility charges for
the house until it’s sold; prior fees to the independent carer;
annual Court of Protection fees to monitor me as deputy and
their guarantor’s bond; a house clearance firm to assist with
heavy labour that I couldn’t manage alone – not to mention
the many years of unseen, unpaid care provided with love by
me and the consequent loss of my own income, professional
status, and life chances.

Now I face the prospect of investing for and managing maybe
another ten years or more of care. At today’s rate, let alone a
likely increase, the total could well top half a million pounds.
Appalling, unjust – and currently unavoidable.

A £35,000 cap, as proposed by Dilnot, or even £50,000 or
£60,000 could give me back my life. Our liabilities would
now be over. I could concentrate on my frail mum, instead
of being crippled by the practical and emotional burden of
single-handedly selling our family home.

I accept that the state cannot meet unlimited costs, but neither
can the individual. “Assets” are not ready cash and can be
hard to realise quickly, involving further expense. At A&E you


Delivering Dilnot

are not asked for cash up front before receiving treatment;
yet for those with long-term, degenerative conditions,
residential care can be just as urgent and essential. It is not
a lifestyle choice.

I never received any carer’s assessment; as I too had some
assets, I would not have been eligible for benefits. But
after six years of primarily caring for mum, those assets are
greatly depleted. I used to earn a good living and would
now have been paying higher rate tax and VAT. Instead, I’m
back to square one in my career, single, childless, and still
responsible for mum. The lack of support in caring for her
has damaged my capacity to plan for future need myself – I’ll
probably be dependent on the state.

My mother has an incurable disease that has robbed us both
of our lives; must it rob us of all our assets too?


Delivering Dilnot


Care provision post-Dilnot

By Lord Stewart Sutherland

Over the last decade successive governments have behaved
like ostriches, with their heads in the sands, believing that
what is out of sight is out of mind. What has clearly been
out of sight are the demographic changes which have
been accelerating across first developed, now developing
countries for many years. The ratios of older to younger,
of those in productive work to those who have retired from
the work force, are shifting remorselessly, but the policy
response to this has been negligible.

Twice, in 1997 and 2010, new young prime ministers have
entered office seized of the need for thought followed by
action. In one case a Royal Commission on Funding Long
Term Care of the Elderly was set up, in the other Andrew
Dilnot and two colleagues were given the task of reporting
on and recommending possible future options. (Or as one
Labour peer put it to me in the summer of 2010 – ‘Déjà vu’!)

The great worry now is that the Government is showing signs
of missing the boat once again. The demographics are clear
and, if anything, even more challenging. Yet the attention,
policy, discussion, and financial response, falls far short of,
for example, the response to climate change.

The demographic changes are not contested by anyone, and
the social consequences of ignoring them will be equally
distressing. Yet in the Dilnot Report the Government has
been given as clear a platform for policy formulation and
action as we are likely to see for the next decade.


Delivering Dilnot

A sustainable solution? Of course it must be. That means
starting with the realities as the touch stone of the size of
the problem. It means looking for adequate and reliable
ways of meeting the costs over time. It means thinking of the
ways in which society will be shaped and operate in these
new circumstances – pensions, housing, transport, work-
life patterns, redefinitions which take us beyond the sharp
dichotomy of ‘productive and non-productive’, and so on we
could go.

However, it will all depend on adequate resources, effectively

Let me give an example. A study of patients discharged from
a period in intensive care, shows that 20 per cent of them
have to be re-admitted to intensive care at a cost of £1,700
per night, within four weeks. This is significantly due to
inadequate support being available in the community. This
is bad care and ineffective use of scarce public finance.

Change requires firm implementation of new policies. The
first is the removal of perverse incentives arising from
uncoordinated health and social security budgets. The second
is the lessening of the Treasury grip on budget re-structuring.
The evidence on the latter is that the Treasury gives first and,
it sometimes seems, sole priority to resisting any significant
change to the structure of public expenditure. As a taxpayer I
am happy to see restraint on unnecessary increases in public
expenditure. As a member of the community, I do however,
expect expenditure to relate to the realities (including the
demographic changes on the ground) of the ways in which
society is evolving.

There is wide acceptance amongst practitioners and users
that effective spending must match the facts. Lack of full
co-ordination of relevant budgets in health and social care
produces bad care and wastes precious resources. Many
additional examples could be cited.

The above examples form just some of the justification for
insisting the Government seize upon the Dilnot Report as a
trigger to, as well as platform for, policy formulation.


Delivering Dilnot

But, do we not already have a policy? In England the answer
is, ‘No’.

What we have is uncertainty. Uncertainty is the lot of those
who have needs of such care, or who are attempting to make
provision for themselves and close family in the future.

This begs many questions. For the potential users of the care
system: Where do I go? Whom do I ask? How much will it
cost? Can I, will I be able to afford it? Can I insure against
future need?

For the potential insurers: How much should I charge in
insurance premiums? Is there a cap on total liability? Are the
risks pooled in any way?

For the private sector, and the banks who might consider
lending: Should I invest in building, extending, or refurbishing
care homes? Should I lend to someone who plans to do any
of these? Can rates of return be reliably estimated? Will local
authorities place clients in our homes? Will they pay fees
adequate to cover real costs?

All of these uncertainties are complemented by the worries of
those receiving care. Is there equality across postcodes and
local authorities? Are benefits assessed and commissioned to
common standards? Are they portable if I move to be nearer
my family? Will I have to sell my house? What happens if my
money runs out?

The uncertainties are widespread, complex and stressful.
They will not be resolved or even confronted until there is a
clear will to turn the idealism of early days in office into firm
sustainable policies.

The Dilnot Report is the best offer of a starting point which
we are likely to have for another ten years.


Delivering Dilnot

: Good care + funding reform = bad politics

By Rt Hon Paul Burstow MP, former Care Services Minister

Tough decisions are the lifeblood of politics.

But there’s nothing tougher than facing the prospect of losing
almost everything you own to pay for care. This deeply unfair
situation is faced by thousands of people across the country
all of the time, causing them untold stress and worry to their
families and loved ones.

For the past decade politicians have steered well clear of
discussing who should pay for care, knowing full well that if
they tip their toes in the water they could drown in waves of
politically-toxic headlines. If you want to talk seriously about
reforming the way care is financed, you have to be brave
enough to say how and who must pay for it.

Some argue this is a debate we need to have at the next
General Election – but by that time it will be too late. Too
many people will have faced the catastrophic costs of care
and that number continues to rise. So this is me sticking my
head above the parapet. I’ll be accused of not knowing basic
politics, of unnecessarily kicking the hornet’s nest of social
care. But quite frankly, I’ve reconciled that when it comes to
making decisions on care it will be tough; but it will be the
right thing to do.

Professor Andrew Dilnot’s proposals are the only viable
option when it comes to securing the future of care in this
country. Treasury officials have tried and failed to knock
them down or come up with an alternative and their silence
on the matter is deafening. But what the Treasury fails to


Delivering Dilnot

see is that reforming care financing would be a huge public
health intervention – saving far more money in the long term
by encouraging people to engage with the need to plan for
the future.

Of course, there are those who accuse Dilnot of merely
protecting those with assets worth protecting. But this is
a gross misinterpretation of a system that would actually
shelter those at risk of high care costs, regardless of wealth.

I fully back Dilnot’s model of a capped system of care linked
to an extended means test of £100,000. In the past a £35,000
cap has been mooted – but the cost this cap would entail is,
I believe, an unrealistic option for the Government at a time
of budget squeezes. After careful consideration, I believe
a cap of around £60,000 (linked to an extended means test
of £100,000) would pool the tail end risk, while shielding
the most vulnerable and delivering choice and control for

It is estimated that a cap of £60,000 in today’s prices would
cost the Treasury £8.4 billion in total between 2015 and
2018/19. It is a lot of money to find, but there is a way of
raising the funds that is both fair and progressive. What
I propose is a new social contract, where in exchange for
peace of mind, those with the broadest shoulders will take
some of the financial burden.

In order to realise this social contract it makes sense to use
a benefit that 80 per cent of older people do not require to
help the 75 per cent who will need care.4748 The Winter Fuel
Payment (WFP) costs over £2 billion a year and is paid to
around 12 million people. If we were to only distribute WFP
to those on Pension Credit our research suggests that it
would raise £1.5 billion a year.

Of course, this would mean that nine million people or
around 70 per cent of those currently receiving this benefit
would no longer receive this £100-£300 annual payment. To




Delivering Dilnot

put this into context, of those nine million, nearly two million
of them have household assets worth £1 million or more.49
Furthermore, linking the winter fuel allowance to those who
claim Pension Credit would actually encourage those only
entitled to receive small sums in Pension Credit to take it up
in the first place.

I am also persuaded by the Institute for Fiscal Studies’
suggestion of imposing capital gains tax at death. This
measure would raise £0.6 billion a year and would target
only the wealthiest with assets such as second homes or
valuable antiques.

A combination of these two measures could total £2.1 billion
and would allow us to shift the financial burden caused
by increased hospital admissions away from the NHS and
into a self-sustaining social care system. Between 2015 and
2018/19 this would raise £8.4 billion, with a small surplus left
over to increase spending against the baseline in social care.
This is not about removing benefits by stealth. It is about
intergenerational fairness and communicating the clear
advantages of paying for care in this way to those who will
require it.

To make Dilnot a reality requires a multi-spending period
decision and for the Government to outline a clear framework
for funding – so that the financial services industry can
innovate and develop a range of products. But in the end, it
will be political will that tips the scales.

This is the biggest unaddressed social and economic issue of
our time. Taking tough yet brave decisions is the only way of
solving this care crisis before it is too late.



Delivering Dilnot

: Care in the twilight: an ABI perspective

By Dr Yvonne Braun, Assistant Director and Head of
Savings and Retirement, Association of British Insurers

“The moral test of government is how it treats those who … are
in the twilight of life…”

The winner of the 2012 Cannes film festival was ‘Amour’ by
the Austrian director Michael Haneke, an unflinching study
of the effects of ageing and dementia on a previously happy,
active Parisian music teacher couple in their eighties. It is
fitting that the subject of ageing and care now receives a
treatment on the big screen – how to ensure that people can
live their last years in dignity is one of today’s most important
policy questions, and the flipside of the tremendous medical
and social achievements of having extended our lifespan.

Given the critical importance of this issue, it is very
encouraging that Government has now started a wholesale
reform of the law on care in its draft Care and Support
Bill, replacing more than a dozen pieces of legislation. It is
welcome that the Bill seeks to create a system built around
people’s needs, and to clarify entitlements to care, so that
people have a better understanding of what is on offer and
can plan for the future.

The Bill requires local authorities to provide people with
information and advice about care, in particular on how the
care system operates in the local authority, the choice of
types of care, and providers, how to access care, and how to
raise concerns about the safety of adults needing care and

Hubert H. Humphrey


Delivering Dilnot

support. We believe there is one important gap in this duty to
provide information – it does not include information about
financial advice, even though funding care needs can be an
immensely far-reaching financial decision, where financial
advice can make a very positive difference.

This is illustrated well by the benefits of immediate needs
annuities. A 2011 academic study has shown many more self
funders could benefit from immediate needs annuities than
currently use the product. Immediate needs annuities are
designed for adults requiring immediate financial support
with their long term care costs. Like other annuity types,
they guarantee an income for life to fund care costs in return
for a one off premium, but the annuity is paid directly to
the care provider for the life of the individual. This allows
individuals and families to insure themselves against the
potentially catastrophic cost of residential care, shifting the
risk of exhausting all their assets to an insurer, and gaining
peace of mind.

However, there are less than 7,000 immediate needs
annuities in force in England at the moment, compared to
over 120,000 older people in residential care who pay the full
costs of care themselves because they have eligible assets of
over £23,350. The research suggests six or seven times more
people could potentially afford immediate needs annuities,
equivalent to 40 per cent of all self funders. This would not
only provide peace of mind for the individuals concerned
and their families, it would also prevent people having to
turn to state support because their care costs are greater
than expected. Encouraging people to take financial advice is
therefore critical, and we will continue to advocate this being
included in the Care and Support Bill.

However, this can only go so far, and immediate needs
annuities will only address care needs at the acute stage.
The fundamental, unresolved question remains of course the
funding of social care, and how responsibility is distributed
between the state and individuals. Many studies and
forecasts, including the infamous Barnet “Graph of Doom”,
show that the costs of caring for our ageing society are rising


Delivering Dilnot

inexorably. At the same time, people do not plan for their care
needs because they are unclear about their responsibilities.
ABI consumer research shows that one in two are not aware
of what help they are entitled to from the Government or
local authority for paying their care costs, with one in three
believing that “care is free like the NHS” and that there is no
point in planning for future long term care costs.

We therefore need a clear settlement for the funding of social
care, and the ABI fully supports the recommendations of the
Dilnot Commission on the Funding of Care and Support.

It is right that paying for social care should be a partnership
between individuals and the state, that individuals should
be protected from extreme costs, whilst making a financial
contribution, and that everyone who receives their care for
free now should continue to do so, which will protect the
poorest and most vulnerable. However, in times of austerity,
finding £1.7 billion annually and rising to implement the
Dilnot Commission’s recommendations is challenging, and
any funding solution has to be sustainable – both future-
proofed demographically, and also consistent with public
expenditure constraints.

We therefore support Government investigating whether
modifications to the Commission’s model could make it
more affordable, for example through adjusting the level of
the cap.

However, whatever the details of the model, the most crucial
element at this point is a clear signal from Government that it
is prepared to act. What is needed is a cross-party consensus
that can lead to a lasting settlement. This was achieved for
the other difficult challenge of paying for life after work –
pensions, where the report of the Pensions Commission
started the process which put in place the ground-breaking
new framework of automatic enrolment, which started in
October 2012. Insurers are key to the delivery of the pension
reforms, just as they can be key to helping people meet their
long term care needs.

The philosopher Abraham J. Heschel said “a test of a people


Delivering Dilnot

is how it behaves toward the old. It is easy to love children.
Even tyrants and dictators make a point of being fond of
children. But the affection and care for the old, the incurable,
the helpless are the true gold mines of a culture.” The ABI
looks forward to working with Government to live up to this


Delivering Dilnot

: Policy recommendations and conclusions

Policy proposals contained in this publication:


We agree with the Institute for Fiscal Studies that
the relief of Capital Gains Tax at death should end.
The current relief is a distortion in our tax code that
is not justified, and it is a measure that would raise
£600 million a year towards implementing Dilnot’s
We propose ending the universal entitlement to
Winter Fuel Payment and to instead link receipt of
this benefit to those who receive Pension Credit. This
would create savings of up to £1.5 billion each year –
which we propose should be spent on reforming the
financing of care.
This policy would incentivise those entitled to Pension
Credit but not receiving it, to begin claiming – as we
would merge the Winter Fuel Payment into Pension
Credit, paying it as a lump sum at wintertime.
We believe that a cap of between £50,000 and £60,000
in 2015 prices is the most appropriate level of a
capped system of care funding. This cap will work
in conjunction with an increased upper capital limit
of £100,000 and would ensure a fair and sustainable
system of care financing.





The Government needs to be clear in its message that a
reformed capped funding system is the most appropriate way
of dealing with a broken social care system, a crisis that has


Delivering Dilnot

lasted over ten years. A capped system cannot work without
the private sector and so it is imperative that the Government
commits to a clear and decisive message in favour of reform.
Without reassurances from the Government, the private
sector will not waste resources creating products that may
not be utilised. A clear direction from Government is also
fundamental if we want to deliver peace of mind to the
thousands of people receiving care and their families.

The Treasury needs to grasp the ‘best opportunity in a decade’
provided by the Dilnot Commission, the goodwill expressed
by the financial services industry and by care providers. Most
importantly it should pay heed to the views of thousands of
people who risk losing their entire life’s work through having
to pay for unexpected and unlimited care costs.

The Treasury must understand that the care funding crisis
is one which will only worsen. The Treasury has failed to
address the issue in any meaningful way so far and it
has singularly failed to offer any alternative to the Dilnot
Commission’s proposals.

The care sector therefore needs to maintain its support for
reform. The sector plays an important role in the funding
debate and hears the effects of poor funding and support from
the people they represent on a daily basis. They understand
the turmoil that people receiving care go through. They also
see how people’s apprehensions and fears are compounded
by the risk of losing their homes and savings in unlimited
care costs.

The public and media needs to realise that funding reform is
urgent and an essential part of comprehensive reform. This
is an issue that has the potential to affect everyone in society,
regardless of their wealth. Furthermore, it is an issue that
will continue to cause enormous distress to people’s lives
when they are at their most vulnerable. But people must
also concentrate on confronting and accepting the unlimited
costs they are currently exposed to. Vast numbers of the
public do not understand that firstly, care is not free, and that
secondly, no system exists to limit their potential expenditure.


Delivering Dilnot

So what needs to happen next?

We believe the next step is to insert the appropriate legislative
levers to allow Dilnot to be implemented in 2015 into the
draft Care and Support Bill. This would require a consensus
to be reached by the joint committee on the draft Bill in terms
of what or if any clauses should be added. It would then rely
upon Department of Health officials being allowed by the
Treasury to draft up the necessary legislation.

Finally, the Coalition’s mid term review is to be released any
moment now. Many believe that social care is under debate
for inclusion in this review, and there are hopeful signs that
those writing the review will see it as their last chance to
announce a legacy policy in this Government’s lifetime. If
the rumours prove to be true this would be a great victory
for those who have campaigned long and hard for such
comprehensive reform of the way people pay for care.

Such an announcement would also mean that Government
had provided a clear message to the market. Without such
a clear signal, financial products will not be developed and
an unfair structure will remain – leaving thousands of people
exposed to the anguish of a fatally flawed system.