Editorial Monday 11 February 2013: Health Secretary's Commons statement on social care funding changes

From Hansard, today's statement in the House of Commons on social care funding.

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The Secretary of State for Health (Mr Jeremy Hunt): With permission, Mr Speaker, I would like to make a statement on the funding of care and support in England.

As we get older, none of us can have any way of knowing what care needs we will eventually face. Some will be blessed with a long and healthy life, but many others will be less fortunate. Today, many older people and people with disabilities face paying the limitless, often ruinous costs of their own care with little or no assistance from the state. Although those with assets of less than £23,250 receive support, those with assets above this level receive none. That is desperately unfair, particularly for those who have worked hard all their lives to pay off their mortgage, save for their future or have something to pass on to their loved ones, only to see their property sold and their savings wiped out. This is something that happens to more than 30,000 people every year or 100 people every day.

The system we have also sends out the wrong message: that people are better off not saving for their future because any savings may only disappear in a puff of smoke. So today I can announce the Government’s radical plans to transform the funding of care and support in England—bringing a new degree of certainty, fairness and peace of mind to the costs of old age, disability and living with long-term conditions, while ensuring that the greatest level of financial support goes to those with the greatest need. We propose to introduce a cap on an individual’s financial contributions towards the cost of care and a significant increase in the level of assets a person may hold and still receive some degree of support from the state.

In 2010, this Government asked economist Andrew Dilnot to look at the whole issue of funding for care and support. The independent Dilnot commission published its recommendations in July 2011. In response to those recommendations and following extensive engagement with the care and support sector, we published the care and support White Paper and the progress report on funding reform in July 2012. In the progress report, we accepted some of Andrew Dilnot’s main recommendations, including those for a consistent, nationally set eligibility threshold for care and support, and universal deferred payments, whereby no one will have to sell their home in their lifetime to pay for care costs. I would like to take this opportunity to thank Andrew and his team for their excellent work.

A core principle set out by the Dilnot commission was that people should contribute to the costs of their own care, but those costs should be limited and protected against the potentially catastrophic costs of care. That should come through a cap on those costs and an extended means test. One person in 10 will be faced with care costs in excess of £100,000, with a small number facing costs significantly higher still. To give everyone peace of mind, from April 2017, we will introduce a cap on the amount that someone over state pension age will be liable to pay.

The Dilnot commission’s original suggestion was for a cap of £25,000 to £50,000 in 2010-11 prices—the equivalent of £30,000 to £61,000 in April 2017 prices. Despite the extremely challenging economic situation in which we find ourselves, we have come as close to that range as possible. The cap will be set at £61,000 in 2010-11 prices or £75,000 once it is introduced in April 2017.

The intention is not that people should have to pay up to £75,000 for their care costs, but that by creating the certainty that this is the maximum they will have to pay, they can then make provision through insurance or pension products so that they are covered up to the value of the cap, thereby reducing the risk of selling their home or losing an inheritance that they have worked hard to pass on to their family. Young people who already have care needs when they turn 18 will now receive free adult care and support when they reach 18. People who develop a care need after 18 but before state pension age will be protected by a cap that is below the £75,000 threshold.

The other measure we propose is to increase significantly the amount of assets a person can hold and still receive financial support for their residential care home costs.

Currently, this is set at £23,250. If a person has assets valued above this level, including in some circumstances the value of their home, they receive no support. The Dilnot commission recommended this threshold be raised dramatically to £100,000 in 2010-11 prices. We accept this recommendation.

From April 2017, the threshold will be increased so that those with assets worth £123,000 or less, equivalent to Dilnot’s recommended level, will all receive some degree of financial support for their care costs. People with the fewest assets will receive the most support. This will, for the first time, provide financial protection for those with modest wealth, while ensuring that the poorest continue to have all or the majority of their costs paid.

Everyone will benefit from the peace of mind that a cap will bring. The introduction of a cap and the extended means-tested support will help many people in the most challenging circumstances. We expect up to 16% of older people who need care to face costs of £75,000 or more—but, of course, none of us knows whether we will be in that 16%. Everyone will benefit from the peace of mind that these changes will bring, and by 2025 up to 100,000 more older people will receive financial support with their care costs as a result.

The Chancellor and the Treasury have rightly insisted that we identify how we pay for the additional costs of these proposals. In this day and age, making promises that cannot be paid for makes those promises meaningless—so we have identified exactly how to pay for them. These reforms will cost the Exchequer £1 billion a year by the end of the next Parliament. With the agreement of the Chancellor, these will be met in part by freezing the inheritance tax threshold at £325,000 for a further three years from 2015-16. The Chancellor and the Chief Secretary have agreed that the remaining costs over the course of the next Parliament will be met from public and private sector employer national insurance contributions revenue associated with the end of contracting out as part of the introduction of the single-tier pension.

These two new proposals join others previously announced when we published the draft care and support White Paper last summer, and they include from 2015 the ability of people to defer the payment of residential care costs so that no one need sell their own home to pay for them during their lifetime. Also from 2015, a national minimum eligibility threshold will be introduced to end the lottery of local access that can see support provided to someone in one area, but not in another. Taken together, today’s proposals and those already set out in the draft Care and Support Bill represent a new era of support for the elderly and disabled in England. Thanks to the certainty these proposals introduce, rather than people feeling they have to hoard every penny in case the very worst should happen, or that they are powerless and there is no point in saving at all, people will be able to plan and prepare sensibly for the future. They will be supported by a wider range of financial products becoming available in the market, which will be designed to help people to plan and prepare for their later years and to reassure them about how much they will pay. We will work with the care and support sector—with local authorities, charities, care providers and individuals—and with the financial services industry to develop the plans and introduce them practically.

Our society is ageing. By 2030, the number of people over 85 will double, and the number of people with dementia will exceed 1 million. As the number of older people with such long-term conditions increases, we need to become a society in which people prepare and plan for their social care costs as much as they prepare and plan for their pensions. Sadly, that is an issue that Governments of all colours have long failed to tackle.

While many other things need to be done to prepare for an ageing population, these reforms herald an historic change in the way in which care and support are funded. The economic circumstances are challenging, but these commitments demonstrate our determination to help people who have worked hard, saved, and done the right thing to prepare for the uncertain hand that fate deals all of us in old age. Because we are introducing these reforms within the time scale and at the thresholds set out, they will also be sustainable and consistent with our overriding priority, which is to reduce the deficit inherited from the last Government.

We want our country to be one of the best places in the world in which to grow old. These plans will give certainty and peace of mind in regard to the cost of care, ensuring that we can all have the support that we need without facing unlimited costs, while also ensuring that the most support goes to those in the greatest need.

I commend my statement to the House.

Andy Burnham (Leigh) (Lab): I thank the Secretary of State for his statement, and for early sight of it. I agree with him that our current social care system in England is the worst of all possible worlds: a cruel lottery whereby people go into later life with everything for which they have worked on the roulette table, and the most vulnerable are always the biggest losers. That needs to change.

The Secretary of State has tabled a modest plan that will make the system fairer than it is today, and we congratulate him on that. We welcome elements of what he has announced today. A cap of £75,000 will protect people from the catastrophic costs of care, and raising the means-test threshold will help more people on lower incomes to obtain some help with care charges. This is a step forward, but it is a faltering one. The House has been presented with a flawed prospectus today. Vulnerable people will still face rising care charges and homes will still be lost, notwithstanding valiant attempts to put the best possible spin on things in the weekend media. Yesterday the Deputy Prime Minister made the big claim that the Government were going to “crack” the care “conundrum”. Today, when we are faced with this meek package, that sounds suspiciously like overselling. Stephen Burke, the director of United for All Ages, has described the cap as

“the dampest of damp squibs”.

Yesterday, on The Andrew Marr Show, the Secretary of State said:

“I've been hauled before the Speaker before and I wouldn’t want that to happen again and so I don’t want to go into the details.”

Now that we have heard the details, perhaps the Secretary of State could explain on which part of his statement the media had not been pre-briefed. It is disappointing that the media rather than the House were briefed first on a statement that was of such importance to so many people. It is also disappointing that the Government have abandoned any effort to build a cross-party consensus before rushing to announce its proposals, and that they have chosen to rewrite the Dilnot report with figures of its own, breaking its careful logic.

More specifically, there are four problems with what has been announced today, and I will address each in turn. First, it fails the fairness test. We will only have a durable solution if it can answer this question: will it help every person and every couple to protect what they have worked for, whatever their wealth and savings? I am afraid that the answer is no. According to Demos, a £35,000 cap would benefit about 3.2 million pensioners. A per-person cap of £75,000 will benefit just 1.4 million. For the average couple, the cap is £150,000. That might be enough to protect detached houses, but it will not protect the average semi-detached home in large parts of England.

As Andrew Dilnot said today, the cap

“is higher than we would have wanted —£11,000 higher than the top end of our range—and I regret that”.

Will the Secretary of State confirm that people with modest to average homes and savings are not protected under his plan? Is this not a plan for the few and not the many, and further proof that we are not all in it together?

The Secretary of State claims that insurance companies will step in with new products to help more people to protect their assets, but in evidence to the Health Committee, the Association of British Insurers said that it did not believe that the capped cost model would result in a market for pre-funded care insurance. So what further confidence can the Secretary of State give the House today that such a market will in fact emerge?

Secondly, the plan is at best a partial solution. With this decision, the Government have prioritised the funding of a cap on care costs with new money, over and above addressing the crisis in council care budgets. Will the Secretary of State confirm that this was against the advice of Andrew Dilnot to the cross-party talks? In practice, it will mean that vulnerable people will continue to face rising charges, as councils put up fees to cope with the growing shortfall in their budgets, making it more likely that those people will, in time, have to pay right up to the new £75,000 cap. To many people, that will not feel like progress.

More than £1.3 billion has been cut from local council budgets for older people’s care since the coalition came to power. Care charges are rising above inflation, and councils are warning that, by 2024, they will be overwhelmed by the costs of care. Does the Secretary of State accept that forecast, and if he does, how will the plans he has announced today help to address it? If he fails to face up to the current crisis in council funding, is it not the case that, with care charges rising, today’s announcement will feel like a con? It is true that the Government have raised the capital threshold, and I have said that we welcome that, but can the Secretary of State give the House any confidence that the extra support that people receive through a more generous means test will not be more than offset by increasing care charges caused by collapsing council budgets?

What people might not know is that the cap reflects not what people actually pay for care but a local authority average, and that it does not include accommodation costs. That was not mentioned in the Secretary of State’s statement. Will not people feel conned if the Government do not make that clearer?

The third problem is that this package disguises yet another coalition U-turn, this time on inheritance tax—[Interruption.] It is ironic, I must say. In 2007, a flagship pledge was made to increase the inheritance tax threshold to £1 million. Just eight weeks ago, the Chancellor said that he would increase the threshold in two years’ time. What has happened in the past two months to make him change his mind? Is not this the quickest coalition U-turn yet? The irony will not be lost on people that the Government are now increasing death taxes to pay for their plan. The Secretary of State has also said the rest will be made up from national insurance. Does he think it is fair to ask the working age population to pay for something else, rather than older people?

Finally, the proposal fails to meet the scale of the challenge of the ageing society. It will not lead to more integration of care. Instead, it will entrench the separation between two separate systems: a free-at-the-point-of-use NHS and charged-for social care. Would it not have made more sense, rather than developing these piecemeal plans in isolation, to have set them out as part of a single vision for a sustainable health and care system in the 21st century? The Secretary of State has made progress, but he has missed an opportunity to produce a long-term plan that is fair to everyone and built on cross-party consensus. He has settled for a timid solution when what older people needed was a far bigger and bolder response.

Mr Hunt: Really! The right hon. Gentleman talked about a flawed prospectus, but what we had from the Labour Government during their 13 years in power was no prospectus whatever. This was in Labour’s manifesto in 1997, then the Government had a royal commission in 1999. There was a Green Paper in 2005, followed by the Wanless review in 2006. The problem was going to be solved in the comprehensive spending review of 2007, but then we had another Green Paper in 2009. Let us compare that with a coalition that commissioned a report the moment it came into office, said after a year that it accepted the principles of the report, and has now, just two years later, announced how it will implement it and pay for that implementation.

Let me go through some of the things that the shadow Secretary of State has said. He quoted one stakeholder, Stephen Burke, but let us look at what some of the others have been saying. The Joseph Rowntree Foundation has said that

“the cap and threshold are welcome measures, and a welcome sign that the government is taking responsibility for addressing care funding.”

Andrew Dilnot said today:

“I recognise the public finances are in a pretty tricky state and it doesn’t seem to me that”—

what the Government are proposing is—

“so different from what we wanted”.

Or we could talk about Age UK, which says it

“has always supported the principle of a cap”

and welcomes the fact that we are increasing what it describes as

“the current miserly upper means test threshold”.

A lot of stakeholders welcome today’s announcement, but recognise that we are in extremely difficult financial circumstances and that that is why we have to be responsible with public finances.

The right hon. Gentleman talked about the cap of £75,000, which is indeed higher than the upper limit proposed by Andrew Dilnot, but to describe this as only helping people on higher incomes is fundamentally to misunderstand how a cap works. First, potentially more than 70% of the £1 billion a year that this will cost the Government by the end of the next Parliament is going to socially disadvantaged families. This is a highly progressive measure, and as well as increasing the cap we are increasing the threshold above which people do not get any help, from £23,000 to £123,000—exactly the kind of thing that some of the most disadvantaged families on the lowest of incomes will benefit from most.

The right hon. Gentleman talks about the Association of British Insurers—he needs to get up to date. It describes this as

“potentially another positive step forward in tackling the challenges of an ageing society.”

[Interruption.] If he wants some more quotes, let us look at what financial services companies are saying. Aegon UK says it

“welcomes today’s announcement and the clarity it brings on state support.”

Legal & General says it is

“pleased the Government has decided to move forward with Andrew Dilnot’s proposals.”

As for local authority budgets—the shocking state of which, by the way, we inherited from the last Labour Government—the Government said in the spending review that the NHS health budget would give £7.2 billion of support for health-related needs to local authorities during the course of this Parliament.

On inheritance tax, what the right hon. Gentleman does not understand about today’s measures is that fundamentally, they are helping people to protect their inheritance from the lottery of social care costs. The randomness of someone not knowing whether they will be the one in 10 who suffers over £100,000 in care costs is eliminated by a proposal that allows everyone to plan and prepare for their own social care costs.

The right hon. Gentleman describes this as a modest plan and says we have neglected the scale of the problem. Of course, in dealing with an ageing population many other issues need to be dealt with. He talked about the problem of integration, which we are solving by devolving power to clinical commissioning groups on the front line, a reform that Labour opposed, and by integrating technology, a reform on which Labour failed. Also, Labour did nothing about dementia, leaving us with less than half the people with dementia being diagnosed. We are now tackling that problem. We saw last week the issues of treating older people with dignity and respect. We are tackling that problem—Labour left it for far too long.

The problem is not that our solution is too small, but that it was too big for Labour to solve when they were in office. When it comes to making Britain a better country to grow old in, this Government are taking action where the last Government failed.

Mr Stephen Dorrell (Charnwood) (Con): Does my right hon. Friend agree with the view expressed by Tony Blair to the Labour party conference in 1997 that it should be a priority for the British Government to sort out the unfairness that prevails in our system of care for the elderly? Does he further agree with me that when our right hon. Friend the Leader of the House was Health Secretary, he set up the Dilnot commission within weeks of this Government taking office, and that the package my right hon. Friend has announced today was described today by Andrew Dilnot as being not so different from the one recommended by the commission set up by our right hon. Friend?

Mr Hunt: I absolutely agree with my right hon. Friend’s points; he speaks wisely, as ever. I, too, want to pay tribute to the work that my predecessor, our right hon. Friend the Leader of the House, did in laying the ground and making the big call that we needed to have the Dilnot commission, and in last year publishing the care and support White Paper, which moved this agenda much further forward than in any of the 13 years of the previous Labour Government. My right hon. Friend is also right about the fundamental randomness and unfairness. Of course, we are not saying that the Government will pay for all the social care costs we encounter—public finances could not possibly be in a state to allow that to happen. However, this provides certainty and allows people to plan, so that they can cope with the randomness and unfairness of the current system and know that it will not put their precious inheritance at risk.

Barbara Keeley (Worsley and Eccles South) (Lab): At £75,000 the cap on social care is far too high to help people in an area such as Salford. The Secretary of State has talked about insurance products developing to help people meet the costs of the cap. In our inquiry into social care, we on the Select Committee on Health were told that this country has no market at all in long-term care insurance—not only that, but no country in the world has a working market in pre-funded long-term care insurance. Is it not wishful thinking of the highest order to talk about people being able to rely on products that do not exist either here or anywhere else in the world?

Several hon. Members
rose—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Many Members wish to get in, as this is a very important subject for all our constituents, so can we please have brief questions and short answers?

Mr Hunt: I am afraid that what the hon. Lady says sums up the attitude of the Opposition; they thought it was wishful thinking to try to solve this problem, whereas we are getting on with a solution. We do not have those financial products available at the moment, but the whole point of these structures is that we will help to create a market in which it is possible to have them. The point of the cap is to allow the hon. Lady’s constituents, even people on lower incomes, to plan and make provision, not only for costs of more than £75,000, but for any costs they have up to £75,000. In combination with that, we are increasing the threshold for Government support from £23,000 to £123,000.

Dr Sarah Wollaston (Totnes) (Con): I warmly welcome today’s statement, particularly the rise in the asset threshold, as I well remember my former patients’ shock when they realised that for anything over £23,250 they would have to meet their entire costs. However, may I ask the Secretary of State to look again at the impact there will be on rural local authorities, for example, Devon’s, which has the fifth oldest population in England?

Mr Hunt: I will certainly do that, and I am grateful for my hon. Friend’s comments. I would just say that it is in some of those areas with the highest proportion of older people that the impact of the current lottery in care provision is so dramatic and needs addressing so quickly. I therefore hope that her constituents will welcome the certainty in these proposals, but I will certainly look at and identify whether any particular issues are raised in rural areas.

Grahame M. Morris (Easington) (Lab): The Minister has concentrated on the impact on the frail elderly, but does he recognise the other care crisis highlighted recently in a report published by four leading disability charities? What will these proposals do to assist in providing social care to working-age disabled people, who make up about a third of social care recipients? The shortfall we have estimated is about £1.2 billion—that is the gap between social care budgets and needs.

Mr Hunt: These proposals will go some way to addressing that problem. First, children who reach adulthood—the age of 18—with care costs will continue to receive the support they need without any qualification at all. Adults who become disabled during their working life will have a cap, but it will be a lower one. So we will be able to offer very important support to both those groups.

Andrew Percy (Brigg and Goole) (Con): I welcome this statement as it moves the system on from where it is today. However, for a lot of communities the social care costs are so much more expensive, particularly in rural areas with very elderly populations, and they are more likely to hit that cap more quickly. So can my right hon. Friend assure us that everything will be done to ensure that the cost of care in these more expensive areas is brought down to something more in line with the rest of the country?

Mr Hunt: We think that these proposals will be particularly effective in such areas, because the higher the costs the sooner someone will reach the cap and the sooner they will get the support they need.

Dr William McCrea (South Antrim) (DUP): No one can deny that elderly and vulnerable people across the United Kingdom live in fear of having to go into care and what that would mean to them. This is not only about England; it is about the rest of the United Kingdom. So what discussions has the Secretary of State held with the devolved Administrations to ensure that our elderly citizens have certainty, fairness and peace of mind about the costs of old age, such as he claims his plan will bring?

Mr Hunt: This is a devolved matter, as the hon. Gentleman knows, but different approaches are being tried in all four constituent parts of the United Kingdom and we must look at what is happening in the different parts and all learn from each other.

John Pugh (Southport) (LD): I welcome the statement. Regardless of the details and figures announced today, does this overall approach not promise certainty and predictability where previously there was anxiety and uncertainty? Is that not the big gain?

Mr Hunt: That is the main point of what is being announced today. We are not able, with the public finances as they are, to offer a huge amount of support, but what we can do is give the certainty that means that for the first time people will be able to plan and make provision for their social care costs. We will be one of the first countries in the world that does that, which is why this is a very encouraging and very important day for people who care about the tremendous uncertainties associated with growing old.

Hazel Blears (Salford and Eccles) (Lab): The Alzheimer’s Society has said today that capping care costs is a step in the right direction, but a £75,000 cap is so high that it will help only the few. The Secretary of State knows that there are 800,000 people in this country living with dementia now, and his announcement today, however welcome it is, does not deal with the community care costs that those people face day to day. This costs a billion pounds in, but there is £1.3 billion out of community costs to local authorities. How will he fill that gap?

Mr Hunt: The right hon. Lady knows well the challenge and the crisis that we face because of dementia, and she has spoken movingly on the issue. What I would say about what the Alzheimer’s Society is saying is that to look at the cap in isolation is to misunderstand these proposals. For many people with dementia, the most significant thing will be the increase from £23,000 to £123,000 in the threshold at which they get state support. That is a big step forward.

The cap is not saying that we expect people to pay £75,000 towards their care costs. We are saying that that is the maximum anyone will have to pay, which makes it possible for people to make provision in their pensions and in insurance policies. One in three of us will get dementia, and we do not know whether we will be among those one in three. This proposal will allow people to put some certainty in place—to make plans now, which means that when they are dealing with the nightmare of either themselves or someone in their family having to cope with dementia, they will not have the double whammy of having to worry about losing their house as well.

Julian Smith (Skipton and Ripon) (Con): Many older people across North Yorkshire have been waiting decades for this kind of certainty, so I thank the Secretary of State for bringing that to them. May I urge him to use his laser vision, which he has shown on this matter, to make health budgets and social budgets work much more closely together?

Mr Hunt: My hon. Friend is absolutely right: that is perhaps the biggest remaining issue that we have to face in the NHS and social care system today. There are interesting parts of the country, such as Torbay, where it is happening very effectively, but anything he can do in North Yorkshire to make it happen more speedily and more effectively will be very welcome.

Chris Bryant (Rhondda) (Lab): Mining constituencies have some of the highest percentages of home ownership in the country, so this issue affects them. Further to the question asked by the hon. Member for South Antrim (Dr McCrea), what discussions has the Secretary of State had with the Welsh Assembly, because I presume that there will be a Barnett consequential—money going to Wales as a result of today’s announcement? How much will that be?

Mr Hunt: All the Barnett consequential issues are decided by the Treasury, and we will of course comply with them.

Mr Christopher Chope (Christchurch) (Con): Is it possible to have some transitional arrangements, because four years is a long time to wait for a family who are already paying care costs? Is it not possible to increase the capital allowance, for example by £20,000 a year, from now on? Is it not possible to allow care costs in excess of £75,000 to be set against future inheritance tax?

Mr Hunt: I understand where my hon. Friend is coming from. All I can say is that we had very strictly to produce a package that is affordable within the current financial constraints. For that reason, we have come up with the package we have. It is the earliest we think we can afford to do this and the lowest cap we think we can afford, but I will of course reflect on his comments.

Fiona Mactaggart (Slough) (Lab): My question follows on from the previous one about what will happen between now and 2017. Many families are frightened about care costs and the statement has nothing for them. Their loved ones are likely to die in the next four years—2 million people will die before this is implemented. What is the Secretary of State doing additionally for local councils, which are trying to help people in that situation?

Mr Hunt: The hon. Lady might show a little humility after her Government did nothing about this for 13 years. We are doing something about it, as quickly as we possibly can.

Dr Julian Lewis (New Forest East) (Con): I warmly welcome the rise in the assets threshold, but I am not clear about one aspect. People such as my father had to sell their home to pay the costs of residential care. It is being suggested that accommodation and food will not be covered by the proposals, but, given that the residential care aspect is so important, can my right hon. Friend give us reassurance?

Mr Hunt: These proposals cover the care costs, but we will be making an allowance for accommodation and food of £1,000 a month at 2017-18 prices. The reason for doing that is that a person would face those costs whether or not they were in a residential care home, and we think it would be wrong to create a system where that person was better off financially being in a residential care home than living at home.

Ian Lucas (Wrexham) (Lab): Beveridge committed to “the cradle to the grave” as the principle in health care. It is clear today that the Government have given up on the public sector contributing to the pre-£75,000 figure. Has he any idea or has he inquired how much the cost of provision would be for a family to obtain cover for that first £75,000?

Mr Hunt: I think the hon. Gentleman needs to study these proposals with a great deal more care. If he had listened to them, he would know that we are extending dramatically the help available to people who have to pay up to £75,000, by increasing the threshold from £23,000 to £123,000 at 2017-18 prices.

Margot James (Stourbridge) (Con): I warmly welcome the action that my right hon. Friend has taken today. To the critics who say that the cap should be lower, would he not say that the main purpose is to provide protection for those people who face catastrophic charges, which are roughly 10% to 15%? Is that not the main point? Does he agree further that this represents a fair resolution between the people’s responsibility to save for their retirement and the responsibilities of the community to protect those to whom catastrophic charges might apply?

Mr Hunt: My hon. Friend, as so often on health matters, is absolutely right. This is about a partnership between the state and the citizen, recognising that the state is not able to bear all these costs on its own, and trying to create the incentives and the certainty whereby private citizens are able to make provision for their own social care costs in the way that they make provision for their pension and, as such, is a very important step forward.

Geraint Davies (Swansea West) (Lab/Co-op): These proposals mean that someone with a £200,000 house pays £75,000, and someone with a £400,000 house pays £75,000. Would it not be fairer if the first £200,000 was charged at, say, 20%, and the second £200,000 at 40%, so that someone with a £200,000 house would pay £40,000 and someone with a £400,000 house would pay £120,000, so that instead of a flat-rate charge, we would have a progressive charge within the financial envelope? Will the Secretary of State consider a fairer system, rather than a flat-rate poll tax?

Mr Hunt: People whose houses have lower value benefit from the fact that we are increasing the threshold at which support is available. Because of that increase in the threshold, they will get some support towards paying for their £75,000, which people with higher value houses will not get.

Mr John Redwood (Wokingham) (Con): Does the Secretary of State see any difficulty in this coalition Government pre-empting a future Chancellor of the Exchequer over tax policy, when I thought everybody in the House wanted a different kind of Government after 2015, who might have their own ideas?

Mr Hunt: We have funded these proposals until 2020 on plans that have been agreed by the Liberal Democrats and the Conservatives. We hope very much that we will have the support of the Opposition for these plans as well. Then we can have a national consensus around them, which is what we need because in the end, if we are to create that certainty in the markets, people need to know that whichever Government are elected, they support the basic approach that we are endorsing.

Dr Eilidh Whiteford (Banff and Buchan) (SNP): These proposals will not apply in Scotland, where people already receive personal and nursing care as they need it, when they need it, regardless of their income. Is the Secretary of State aware that this approach has helped to reduce substantially the number of people requiring long-term hospital beds, has also helped to reduce NHS bed-blocking, and has enabled thousands of elderly, frail people in Scotland to live in their own homes, rather than face the crippling costs of moving into residential care?

Mr Hunt: There are some things that we can learn from Scotland and some things that we cannot learn. Scotland has a very good record in identifying people with dementia, and the point that the hon. Lady makes about helping people to live at home for longer is a very good one. Care costs incurred in domiciliary care for people who are living at home will count towards the £75,000 cap, so we hope to have many more flexible ways for people to provide for themselves and be able to live at home happily and healthily for longer.

Andrew Stephenson (Pendle) (Con): I welcome today’s statement. Most welcome to my constituents will be the increase in the means-test threshold of state support from £23,000 to £123,000. Given that December’s figures from the Land Registry put the average house price in my constituency at only £114,000, will my right hon. Friend confirm that these proposals represent a very good deal for Pendle home owners, most of whom are on low incomes and of only modest wealth?

Mr Hunt: That is absolutely the point. The group of people we are targeting with these proposals are not the most vulnerable, because they already get all their care costs covered if their assets are less than £23,000, but the people one step up from that, who in many cases have worked hard, saved all their lives and paid off their mortgage, but have a house that is not of sufficient value to cover the social care costs they need. I hope that these proposals will be very welcome in Pendle.

Pat Glass (North West Durham) (Lab): Can the Secretary of State assure me and my constituents that any gains they may make from his proposals will not be completely wiped out by the massive cuts to local authority care budgets—£120 million this year alone in my own local authority?

Mr Hunt: We have looked very carefully at the cuts that local authorities are facing in England in order to make sure that that should not compromise adult social care. They are not ring-fenced budgets. That is why we put in an extra £7.2 billion of support from the Department of Health’s budget where there are health-related needs. We are watching this very carefully throughout the country.

Mr Philip Hollobone (Kettering) (Con): People in my constituency will want to congratulate the Secretary of State on grasping this nettle. Can he confirm that after 2017 there will be some kind of index-linking on the liability cap and the asset threshold? Is there now an implied permanent link between the yield from inheritance tax and the nation’s social care costs?

Mr Hunt: I do not think that there is an implied link in the way that my hon. Friend suggests, but I will reflect on his comment to check that I fully understood his brilliant insight. Automatic indexation is of course a matter for future Governments and future Parliaments, but it is certainly our intention that the proposals we are making will continue to take account of changes in the cost of living.

Barry Gardiner (Brent North) (Lab): I welcome aspects of the Secretary of State’s statement. Does he agree that the security in old age that he is seeking to put in place will not be effective for as long as companies such as Phoenix Life are able to offer people like my constituent, Mr Gerard Burton, £221 a month for the rest of his life, at the age of 84, in return for half his house? Will the Secretary of State speak to his colleagues in the Treasury to ensure that there is great scrutiny of precisely what financial products are being offered in this domain?

Mr Hunt: I do not know the details that the hon. Gentleman is talking about, but I would be happy to speak to Treasury colleagues about that issue.

Mr Nick Gibb (Bognor Regis and Littlehampton) (Con): This statement will be very welcome in my constituency, which has a very high proportion of retired and elderly people. May I warmly congratulate my right hon. Friend on gripping a problem that has eluded previous Governments? Can he confirm that the new higher savings threshold of £123,000 will not include the value of a couple’s home when the spouse or dependant of the person in residential care still resides in that home?

Mr Hunt: I can absolutely confirm that, yes.

Diana Johnson (Kingston upon Hull North) (Lab): On the financial products that will be available, will the Secretary of State produce evidence so that constituents in Hull can find out what kind of figures we are talking about as regards their protecting themselves for the future?

Mr Hunt: I am making the announcement today, so we have to give the financial services industry some time to respond to the proposal. However, the indications are encouraging, and I think that we will all see, in plenty of time for the 2017 start of this plan, what products are available. There may be separate products, but it may also be something that becomes part of people’s pension planning. In the same way that people decide what arrangements they want in their pension for an annuity and for a lump sum payment, payment towards these costs up to the level of the cap may become another part of the pension plan. We need to let the pension and insurance industries have the time to respond and to come up with these plans.

Paul Burstow (Sutton and Cheam) (LD): Does my right hon. Friend agree that, in evaluating these proposals, the public need to understand the nasty little secret at the heart of social care in this country, which is that we have among the harshest of means tests and that that leads to people facing catastrophic costs? Will he also ensure, in making these reforms, that he provides the Joint Committee examining the draft Care and Support Bill with all the necessary details of how this will be implemented?

Mr Hunt: I would be happy to do that and I am grateful to the right hon. Gentleman’s Committee for its work to date on pre-legislative scrutiny. He will understand why I was not able to go into details when we met to discuss the Bill last week. He is absolutely right: dealing with that threshold is one of the most important things and I am sure we will benefit from good scrutiny, as we have done to date.

Julie Hilling (Bolton West) (Lab): I want clarity about what the costs include. My mother’s journey has involved eight months in residential care and she is now back home where carers visit her four times a day. Would either of those count towards the eventual £75,000 cap?

Mr Hunt: Yes, they would.

Julie Hilling: Both?

Mr Hunt: Yes.

Alun Cairns (Vale of Glamorgan) (Con): I pay tribute to the Secretary of State for the significant progress he has made on this issue, which was ignored for so long by the Labour party. The shadow Health Secretary, the right hon. Member for Leigh (Andy Burnham), has called for a bigger and bolder response. What estimate has my right hon. Friend made of the potential costs of a bigger and bolder response, and does he not think that any such criticism should have allied to it a source of funding in order for it to have any credibility?

Mr Hunt: I thank my hon. Friend for his question. The shadow Health Secretary complained this morning that we have not adopted the precise cap that Andrew Dilnot said he would have liked. That would have cost an extra £2.4 billion a year by 2020, on top of the plans that we have announced. It is up to the Opposition to tell us how they would find that money if that is what they want to happen.

Steve McCabe (Birmingham, Selly Oak) (Lab): Is it not likely that the decline in domiciliary services will accelerate to the point at which people are forced to enter residential care? Has the Health Secretary factored those rising costs into his calculations?

Mr Hunt: The care costs that people have at their home will be included in the amount calculated towards the cap, so what we are hoping for is the opposite—that this proposal will lead to an expansion of domiciliary services. I think that people will welcome that. At the heart of controlling our social care costs, both financially and on a human level, is a structure that allows more people to live at home, happily and healthily, for longer than is currently the case.

Jason McCartney (Colne Valley) (Con): Does my right hon. Friend agree that, to be credible on social care funding, any package needs to be fully funded, unlike yet more random, pie-in-the-sky, unfunded spending commitments?

Mr Hunt: Absolutely. There was a time when the Labour party would have considered a package that will be worth £1 billion a year by the end of the next Parliament to be a significant investment, but after its free spending ways of a billion here and a billion there, we are now talking real money.

Charlie Elphicke (Dover) (Con): May I congratulate my right hon. Friend on a meaningful step forward in the social care debate, with a proper settlement? The shadow Health Secretary made a spending commitment of a £35,000 cap; for the record, how much would that spending commitment cost the country?

Mr Hunt: What the shadow Secretary of State said this morning would have cost the country an extra £2.4 billion on top of the proposals that we are outlining today. Labour Members need to say whether they would pay for that by increasing taxes or by reducing spending, but perhaps they are thinking of adding to the deficit.

Martin Vickers (Cleethorpes) (Con): I, too, welcome my right hon. Friend’s announcement and the progress he has made. However, he will be aware that in a constituency such as Cleethorpes, which I represent and where a terraced house can cost less than £75,000, vulnerable and elderly people will still be concerned about the figures that are being tossed around. Will my right hon. Friend ensure that his Department passes the information to local authorities and local organisations that advise such people, in the hope that they can clearly understand the commitments?

Mr Hunt: We will be happy to do that. I think that my hon. Friend’s constituents will value the fact that the horrifically low threshold of £23,000, beyond which they get no help at all, will be raised significantly to the £100,000 threshold, in 2010-11 prices, that Andrew Dilnot recommended. Under the draft Care and Support Bill, all local authorities will be obliged to give a care assessment and access to financial advice to everyone in their area in order to make sure that constituents such as those of my hon. Friend are given the information they need.

Glyn Davies (Montgomeryshire) (Con): I, too, greatly welcome the framework for social care that the Secretary of State outlined in his statement. The Barnett consequentials should mean an extra £10 million for Wales if the proposal costs about £1 billion. What discussions has he had with the Welsh Government to encourage them at least to invest the Barnett consequentials in social care, given that it is as big a problem in Wales as it is in England?

Mr Hunt: I have had no discussions on that point. I will first establish what the Barnett consequentials of the announcement are. I would then be happy to talk to my hon. Friend.