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Ex-care minister: means test winter fuel allowance to fund Dilnot reforms

by Jun Merrett on Jan 03, 2013 at 11:59

Ex-care minister: means test winter fuel allowance to fund Dilnot reforms

The former minister of care services has proposed means testing winter fuel allowance to help fund Andrew Dilnot's proposed long-term care reforms.

Paul Burstow, MP for Sutton, Cheam and Worcester Park, who was minister of state for care services from May 2010 until September 2012 has argued winter fuel allowance should only be given to those receiving pension credit.

A report written by Burstow and think tank Centre Forum predicted this would save £1.5 billion a year with three quarters of people currently receiving the allowance set to lose it.

The report also proposed scrapping capital gains tax relief at death which it anticipates would raise £600 million a year.

Under proposals from by economist Andrew Dilnot (pictured) to reform long-term care funding the government would fund care costs above £35,000, excluding care home costs. Individuals currently have to pay for their care costs if they have more than £23,000 in savings.

However Burstow has proposed the cap on people's own funding to their care would be set at £60,000.

Dilnot's proposals, which were published in July 2011 have faced delays in implementation but in October 2012 the government pledged that it would implement the £35,000 cap as soon as possible.

Independent pensions expert Ros Altmann argued Burstow’s proposal punished savers and could lead to more people relying on the government for care fees.

'Taking money away from older people who have been prudent and provided for their own future, would be a further major disincentive to those hard-working people who have set money aside for retirement,’ she said. ‘It is likely to mean more people deciding not to bother to look after themselves, since they see colleagues who may have chosen not to bother setting aside sums for the future receiving far more than they do.'

Altmann also said care fee funds could be raised by taxing pensioner benefits or increasing the age of entitlement but any rule must be universal to ensure all pensioners receive money and are not dissuaded from saving for retirement.

6 comments so far. Why not have your say?

Julian Stevens

Jan 03, 2013 at 13:14

By comparison with the relatively minuscule costs of allowing tax relief on premiums to LTC insurance plans (which, as well, would stimulate the economy), the Dilnot proposals are about as stupid as it's possible to imagine.

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Sam Caunt

Jan 03, 2013 at 13:32

This was discussed on radio 5 this morning and there was one question that should have been asked of the interviewee who was unhappy that her mother had had to sell her home to fund care. Why should I pay (through taxation) for your mother's care? Not a question that politicians like to ask because the true answer would make them unelectable at the polls.

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Charles Rickards

Jan 03, 2013 at 13:43

Means testing winter fuel allowances would cost more than it would save. It was a stupid benefit to introduce in the first place, when all that was needed was an increase in the basic state pension to achieve the same financial benefit. The difference would have been that an increased state pension would have been taxable and therefore a tax reclaim would be automated for the majority. However, as with so many benefits they are primarily designed to secure votes!

The welfare system needs thorough and transparent reform. The tax payer needs to know exactly what the money is being spent on, so that through the democratic process, we can ensure that future governments spend the taxes they collect efficiently.

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Eamonn Dorling

Jan 03, 2013 at 13:56

Allowing tax relief on LTC premiums would make virtually no impact on the situation in my opinion - very few individuals begin planning before a 'situation' arises and there is no compulsion to make such arrangements. At least with a pension there is a pretty good chance you can benefit from your prudence.

I agree with the sentiment but looking at the products currently available I cannot see a big opportunity yet.

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Julian Stevens

Jan 03, 2013 at 14:20

Your opinion is no more or less valid than mine, but my thinking is that:-

1. tax relief would be a big incentive to start doing something to address a (now widely publicised) problem such as the potential ravages of LTC costs,

2. Monthly instalments are the most manageable way of paying for anything,

3. The costs to the rest of us of tax relief on premiums to LTC insurance plans would be vastly less than £1.7Bn a year and that

4. Families (not just individuals) who don't bother to take advantage of tax assistance to address the issue (assuming they have the means to do so) could expect little sympathy when the family home has to be sold off. Plus, of course,

5. Hundreds of millions of pounds flowing into LTC insurance plans would be good for the economy, for jobs, for tax revenues, for NIC revenues and so on ~ all positive knock-on effects. What will be achieved on those fronts by draining the Exchequer of £1.7Bn a year? How can the politicians not see this?

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Eamonn Dorling

Jan 05, 2013 at 19:50

Can anyone tell me how much a couple in good health (him 65 - her 60) would need to contribute monthly for £35,000 worth of care funding paid directly to a care provider? I am struggling to get a ballpark figure.

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