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What is the ‘Dementia Tax’?

On page 67 of the Conservative Party manifesto (analysis here), Theresa May’s “team” announces a significant shift in the way elderly care is going to be paid for. Their plans have generated a great deal of controversy which, combined with means testing for winter fuel payments and ending the triple lock on pensions, moves the Tories away from protecting pensioners from the squeeze they unnecessarily put on public finances to one where they’re going to have to also pay. It has proven hugely controversial. Some Conservatives are very unhappy with it, and you can bet this view is shared by more than a few of their MPs. Setting aside the politics of the changes and why the Tories have decided to put this policy in their manifesto, what do the measures mean and why is Labour dubbing it the ‘Dementia Tax’.

Presently, recipients of residential care have to part fund the service they receive if they have assets in excess of £23,250. If they are applying for a place in a home, they have to include the value of their house in the means test. As around two thirds of pensioners are home owners, this often means selling the house from under them to pay for their care package – though an option exists to defer costs. To demonstrate, assume a 75 year old pensioner requiring residential care has £25k in savings and their house is worth £89k. Leaving aside income and assuming that person then lives for a further six years (in line with current life expectancy), according to care costs calculators for Staffordshire (because that’s where I live) you’re talking upwards of £190k. Note this will vary from county-to-county and by local authority area. Therefore, our pensioner would presently be required “contribute” almost £91,000. The remaining £23k of their assets will remain theirs. If on the other hand our pensioner requires domiciliary (at home) care, the application in this case would take into account their savings only. This care is cheaper, costing between 70-75% of being in a home and their contribution would be just £1,750 (again, leaving aside income from their pension(s)).

What they giveth in one hand they taketh with the other. Under the proposals in their manifesto, our imaginary pensioner above wouldn’t have to pay anywhere near as much as the Conservatives promise to raise the capital floor to £100,000. Their contribution would shrink to just £14,000. Sounds alright, doesn’t it? But here’s the catch. The Conservatives want to redefine the asset base so the house is counted for residential and domiciliary care. Another change is they will only come for the assets after the person in receipt of care has died. On the surface then, pensioners who are poorer or moderately okay like the example given would benefit. But older people whose combined assets are in excess of £100,000 are going to get clobbered. Or, rather, their families and children are. The problem for the Tories is this is their vote base, and there are millions of pensioners in this position. All of a sudden, estates of people in receipt of domiciliary care are going to receive steep bills after their loved one has died.

This sets up all kinds of problems and difficulties. For pensioners living as couples, how does this recoup costs from shared assets like a home? If their house is £250,000, would the estate be expected to pay £150,000 or £25,000? And in either case, would the surviving partner be expected to liquidate their shared asset to pay the bill? Likewise, for live-in carers who might be sons, daughters or whatever, can we safely assume that they will be expected to sell up their inheritance to pay the balance off? And what will they do about the scramble of elderly people transferring ownership of assets to relatives before they put in a care application and therefore avoid the charges? Unfortunately, none of this is clarified in their manifesto. Unlike Labour who provided costings for their pledges, the Tories chose not to.

The Conservatives say they’re doing this to put adult social care on a firmer footing. Since 2010, the Coalition and then the Tory majority government have foisted tough cuts on most local authorities by chopping down the local government grant year-on-year. As budgets have got tighter, councils of all political complexions have had to redesign, strip down, and withdraw services. This has mean adult care could not but be hit too. Waking up to it belatedly last year, partly thanks to the winter beds crisis in the NHS, the government have allowed councils to increase council tax by an addition 2% to pay for adult social care only. But this cannot fill the gap, and so the Tories are moving to a model whereby the user pays after the fact.

The result would be to grow the number of people eligible to pay more for their care. Hence why it has been dubbed the dementia tax. None of us know what care needs we might require when we get old. None of us can really do anything about avoiding them either. We all get weaker, a good chunk of us will suffer health complications, an unlucky number are going to develop dementia. Whatever happens, the state will look after us and when we die, grieving relatives can look forward to demanding letters from the council asking them to hand over tens, and in some cases, hundreds of thousands of pounds. The dementia tax is a tax on old age and that’s why, despite everything, it could cost the Tories the general election.

2 Comments

  1. Sam says:

    If the so-called dementia tax “could cost the Tories the general election”, that rather implies that the author believes that some other party might win. Which one’s that then? Have you laid a bet? Why not?

    1. Steven Johnston says:

      I thought the left loved taxes and supported increased taxation, to pay for social care?
      Have I missed something?

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