Older workers ‘should pay NI to avert social care disaster’
Controversial plan by key adviser to Hunt will hit wages of over-65s
MORE than a million older workers may have to start paying National Insurance to avert ‘disaster’ in England’s social care system, a key Government adviser has warned.
Those still working beyond the state pension age – currently 64 for women and 65 for men – are exempt from paying the levy.
But Sir Andrew Dilnot, a senior member of the committee advising Jeremy Hunt on social care, told MPs older workers could pay more to help plug the financial black hole.
The economist said the present system was ‘creaking’, leaving families ‘terrified’ and the middle classes forced to pay exorbitant care home charges.
An alternative system would be to introduce a cap on the amount people have to pay for their care, with older people paying the cost through NI.
There are currently more than 1.2million still working past retirement age.
Sir Andrew, 57, told the Commons health and social care committee it was ‘anomalous’ that the over-65s paid less tax on their income than under65s, and it heightened feelings of ‘intergenerational injustice’.
He said a cap on care costs could also be funded by inheritance tax, stopping the winter fuel allowance for the wealthier, or taking a set amount from estates.
And he warned: ‘The system is under very great strain and there is a risk of fairly significant disaster [without reform].’ Under England’s care system, older people have to pay the full cost of their care right down to their last £23,500 – often denying their children an inheritance.
Seven years ago, it was Sir Andrew who suggested imposing a cap on the amount people have to pay towards the cost of their care – with the state stepping in to pay the rest.
At last year’s general election Sir Andrew warned Theresa May she had ‘missed an open goal’ by dumping his proposal for a care cap in favour of controversial plans that were quickly dubbed the ‘dementia tax’.
But, after a bruising election result for the Prime Minister, his plan to enable people to protect themselves against the lottery of care costs in later life is back in favour.
Health Secretary Jeremy Hunt indicated last month he favoured some form of cap, and Sir Andrew is now back on the team advising the Government. The cap could be set at around £75,000.
But the cost to the Treasury could top £2billion a year, and Sir Andrew said it would be ‘perfectly justified’ to ask the working elderly to contribute to this fund.
He said: ‘Until a cap is introduced the population as a whole faces no opportunity to pool their risks. Everybody is facing what is terrifying for them and leads to people feeling very frightened.
‘So yes we need more into the means test, but we also need a capped system which could perfectly legitimately be funded through taxation or increasing charges for the affected population.’ National Insurance, which men over 65 and women over 64 currently do not pay, is a 12 per cent levy on earnings between £8,060 and £43,000 a year and 2 per cent on pay above this.
Former Tory chancellor Kenneth Clarke also called last month for pensioners to start paying national insurance, saying: ‘You get your state pension on top of your pay, so the least you can do is pay the same tax on your salary as your colleagues do.’ Mr Clarke suggested better off pensioners should also lose perks like the winter fuel allowance and free bus passes. In a
‘Under very great strain’
separate intervention, Kent County Council urged ministers to consider a £30-a-month tax on all workers to help repair a care funding system it described as ‘broken’. It warned the committee the current funding system ‘leaves no incentive for people to save for old age’ as they would forfeit their savings if they needed long term care.
The authority said there was ‘substantial cross-subsidisation’ within the system, which meant self-funders typically paid fees 40 per cent higher than those who had their bills paid by the council. ‘Self-funders are therefore not only paying for their own provision but also towards the provision of others,’ the council said.
Sir Andrew also said cashstrapped town halls were slashing the amount they paid care home providers, meaning middle class people who funded their own care were being ripped off.
‘The means-tested system is creaking in various parts of the country,’ he said. ‘In some areas there is an extraordinary gap between what self-funders are paying and what local authorities are paying.’
Sir Andrew said it was right that older people should contribute to the cost of a cap, because they would be benefiting from it.
He suggested one way would be ‘taking some money out of people’s estates’.
But it would be ‘more natural’ to extend National Insurance.
‘It is anomalous that older people don’t pay any NI contribution,’ he said.
‘Older people are paying a lower rate of tax on their incomes than younger people are. That goes into some of the questions we have about intergenerational justice.’