Exclusive: The government is working on a social care insurance scheme following last year's 'dementia tax' row

Catherine Neilan
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Protesters campaigning against the proposed 'dementia tax' in 2017 (Source: Getty)

The government is working on a new plan to address the escalating cost of social care, as it tries to shrug off the spectre of its proposed "dementia tax" – a policy that provoked a furore during the Conservatives' disastrous 2017 General Election campaign.

City A.M. understands that a set of proposals are being readied in time for the Conservative party conference in October, where a fresh approach that focuses on an insurance-style savings pot will replace the previous recommendation that the cost be offset against individuals’ homes.

The new plan, which is believed to have been worked on by former health secretary Jeremy Hunt and now taken on by his successor Matt Hancock, will encourage people to start saving in their 20s or 30s, culminating in a lump sum of £40,000-£50,000 to pay for any care required in their elderly years.

It is not clear whether the pot would be personal to the saver or pooled, akin to National Insurance, although the latter is thought to be more likely with existing schemes in countries such as Japan.

Number 10 is also understood to be working on the plan, with one source saying Prime Minister Theresa May viewed social care as “the big domestic agenda prize” for her legacy.

“The election was a disaster for that idea, that conversation,” the source added.

They compared the new approach to the one taken for statutory pensions, saying: “This doesn’t all come into tomorrow. It will be a phased approach, with options for those who have saved to be able to actually access a scaled up service.”

Another Westminster insider told City A.M. the position had shifted because Number 10 “doesn’t want to scare people so this is about dealing with future generations – they don’t want to piss off older people”.

Currently older people with assets worth more than £23,250 must part-fund the cost of the care they receive, but there are growing fears of a looming crisis as a result of the UK’s ageing population.

The Local Government Association claims the social care shortfall could hit £3.5bn by 2025.

Industry is ready to back the idea, which will be the subject of a green paper in the autumn.

“If government can get the package right, long-term investors and insurers are ready to play,” said Iain Anderson, executive chairman of City lobbyists Cicero. “It also moves the country on from its Brexit obsession.”

A spokesman for the Association of British Insurers said: “If some kind of compulsory social insurance based model is pursued it is important that the funds raised are ring-fenced so it is spent on social care alone and not diverted to other areas at a later date. A compulsory system should also leave some incentive for individuals to make private, top-up provision, as is typical in other countries.”

Stephen Lowe from retirement experts Just Group said: "Although the aim [of the green paper] is to put in place long-term solutions, the reality is that our ageing society is in urgent need of some quick fixes to see us through the coming years and perhaps decades... retired people have billions tied up in the value of their homes, usually far more than in their pensions or other assets. That puts property wealth at the centre of the debate about what can be done in the short-term."

A Department of Health and Social Care spokesperson said: “We’re committed to reforming social care to ensure it is sustainable for the future.”

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