Selling the family home to pay for care is not an injustice

The sound of the well-off grumbling about their finances is always an unattractive one. But there is one gripe that has become particularly powerful, filling the airwaves and shaping public policy. This is the persistent, ever louder complaint from many households that they are required to sell the family home to pay the costs of care for a close relative. It is a practice widely seen as ‘a scandal’, where the state seizes private property because of its own failure to create a properly funded care system that meets the needs of the elderly.

The flames of grievance are stoked by the press, pressure groups and politicians, who promote the belief that all social care should be free, or at least massively subsidised. The campaign body Age UK moans that ‘167,000 older people now have to fund their own care because they do not meet the brutal means test’. One newspaper recently screeched about ‘the betrayal of the middle class’. Sensing the mood, Boris Johnson declared when he became Prime Minister in July 2019 that ‘my job is to protect you and your parents and grandparents from having to sell your home to pay for the costs of care’.

High Covid death rates in care homes highlighted the need for comprehensive reform in this sector. For campaigners, such change should mean a vast new injection of cash that will end ‘the injustice’ of the expropriation of assets by the government. In March, Johnson pledged a ten-year plan for social care, while last month Matt Hancock confirmed that social care reforms would be implemented before the end of this year, though there was only a brief, vague mention of the government’s plan in the Queen’s Speech this week. The indignation is driven by the requirement that any residents with savings or assets of less than £14,250 are entitled to free care, whereas those marginally above this threshold have to pay a share of the costs, while those with capital of more than £23,250 have to meet their bills in full. Under this rule, it is estimated that 17,000 older people have had to sell their homes in the past year, up 45 per cent since 2000.

This might be an emotional wrench for families, but it cannot really be described as a ‘scandal’. Indeed, the cry of free care for all involves a far greater unfairness, since such a measure could only be paid for by a huge rise in taxation. In practice, hard-pressed wage earners would have to fork out more to enable richer households to keep their wealth intact. Behind the rhetoric about inequity lies the determination of many of the affluent to protect their inheritances.

Why should other taxpayers be hammered to uphold these private ambitions? In a society where average full-time weekly pay is just £586, the equivalent of £30,472 a year, many of those targeted for additional bills will not even own their own homes, nor enjoy anything like the affluence of the inheritors. It is a twisted kind of entitlement to believe that the government has a duty to provide free care so that the better-off can safeguard their legacies.

There is vast private wealth in this country, partly due to the explosion in the value of property, with the over-65s accounting for almost half of the money in housing. According to one estimate, total household net wealth was £14.6 trillion in December 2019. The pandemic has only accelerated the trend, with house prices rising by no less than 8.6 per cent over the 12 months to February.

Inheritances are part of this pattern. A study last year by the Institute for Fiscal Studies estimated that, as property values surge, the median inheritance for those born in the 1980s has risen to £136,000, more than double the £66,000 for those born in the 1960s. Many receive far more; the IFS analysis revealed one quarter of people born in the 1980s have parents with an estate ‘per heir’ (that is after dividing it between their children) of £300,000 or more. It is only right some of this wealth should be tapped to pay for social care.

Such an argument is an affront to the inheritance protection brigade. They want none of the financial responsibilities for care and all the advantages of a free system. The most blinkered wail that their parents ‘worked hard’ to pass something on, but soaring property prices provide a classic example of unearned wealth. They gripe about the state’s generosity to those without any assets, but want the wealthy to become the biggest welfare claimants of all.

There is undoubtedly a care crisis in Britain, but the political focus on protecting property has thwarted attempts at sustainable reform. In a sense it is the middle classes who have betrayed the system with their narrow self-interest. When in 2010 Labour came up with a perfectly sensible proposal for an inheritance surcharge to pay for long-term care, it was immediately denounced by their opponents as a ‘death tax’. The party went down to a heavy defeat. In 2017, Theresa May set out a plan by which people needing social care would have to pay for it until the value of their assets, including their home, reached a floor of £100,000. Nicknamed the ‘dementia tax’ the idea prompted such a furious reaction that it almost ushered Jeremy Corbyn into power. Since then, ministers have been too paralysed to act.

But a free care system is not the answer. There is no cost-free panacea, as is demonstrated by how other countries have grappled with the problem. Japan’s system, to which everyone over 40 has to contribute, is funded by a mix of taxation, age-based premiums and user co-payments. In Germany everyone has to contribute to their future costs from the moment they start working, either to the government’s own programme or to private health insurance.

In the UK, some argue that private insurance could be the way to spread the cost and avoid enforced home sales. But that is not practical, because private insurers refuse to provide suitable products. A more realistic suggestion was put forward in March by Lord Lilley, the former social security secretary. In a paper for the thinktank Civitas, he urged the creation of a not-for-profit company, owned and guaranteed by the state, which would ‘offer everyone approaching state-pension age the opportunity to take out insurance against the need to finance, from their home or other assets, the cost of social care’.

The charge — which would be a small fraction of the property’s value, perhaps as low as £16,000 — would only be realised when the owner dies or the home is sold. That offers a workable, affordable way out of the current mess — if only some of the middle class would drop their obsession with maximising their inheritances.