Now every family faces a tax for old age - and the middle classes could pay twice

12 April 2012

Every working family could face paying an "ageing tax" to provide care for the elderly, Gordon Brown proposed yesterday.

It would take the form of a compulsory levy to force them to cover the cost of care home places in the last stages of their lives.

The ageing tax is a central plank of a consultation launched by the Prime Minister in the face of a growing crisis over who should meet the bills for the care of the elderly.

But the proposals raise the prospect of the modestly well-off having to pay twice.

They include no guarantee of ending the hugely unpopular system which forces elderly people to sell their homes to meet care home bills and deny their children an inheritance.

Instead, the consultation paper said, means tests will stay and working people who pay the planned tax will continue to meet the bills of those "in need" - many of whom have no savings or property because they have never worked or saved.

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It said "housing equity" might still be used to cover costs.

The deepening controversy over the way care home places are paid for - and the resentment felt by families forced to sell homes - has been highlighted by the Daily Mail's Dignity for the Elderly campaign.

Yesterday's consultation paper, endorsed by Mr Brown and seven Cabinet ministers, put back any decisions until next year.

But it declared that the Treasury cannot pay the fast-rising cost of care homes and home help as the number of elderly people increases.

It said 68 per cent of people in care homes and 73 per cent of home help services are currently publicly funded.

But a "funding gap" of £6billion will open over the next 20 years between the amount paid by the taxpayer and what will be needed.

It continued: "We think the principle of sharing costs between the family, the individual and government is right.

"However, we must avoid over-stretching families and individuals, and believe that it is worth exploring how every adult could contribute in a way that insures them against very high costs of care and support.

"If every adult makes a contribution, the risks of high costs hitting each household are reduced."

Bleak: The future for the elderly in the UK

An ageing tax could run alongside the existing National Insurance levy.

On means testing, the paper admitted that it can penalise people who have worked hard and made sensible decisions. But without it, "support is poorly targeted at those who need it most".

The document said government could do a number of other things, including making private insurance for care and support compulsory.

But independent experts are sceptical. They say the insurance industry has produced few ideas, largely because people are thought unwilling to pay high premiums for care they may never need.

The proposal for a new tax brought outrage from the Government's critics.

There was resentment that Mr Brown, the Chancellor who undermined the private pension system by taxing pension funds, now plans another tax to pay for care for elderly people.

Jill Kirby, director of the centre-right think-tank Centre for Policy Studies, said: "This is the Government that wrecked our pensions. It is hard to have any faith in their proposals for 'compulsory savings'.

"The best way to encourage people to save for their old age is by reducing the tax burden and encouraging them to make arrangements for themselves.

"It would help if people's pensions were not taxed."

Christine Melsom, of Is It Fair?, the council tax campaign which has wide support from pensioners, said: "The middle classes will carry the burden just as they do now.

"My guess is that people will pay the tax and their families will still lose their homes."

Labour has been aware of concern over means testing since before it came to power in 1997. Tony Blair set up a Royal Commission, but its report was largely ignored.

The new consultation paper was launched by Mr Brown in a talk at the King's Fund, the research group that published the 2006 report on the cost of ageing by Sir Derek Wanless.

Sir Derek estimated that an extra £10billion is needed to make the care system work properly.

But there was only a token £31million of new money on offer yesterday.

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