My Lords, the noble Baroness, Lady Greengross, rightly highlights one of the central features of the Government’s proposals—namely, the generational redistribution between poorer workers, who pay for the cap, and the older people who benefit from it. Actually, so far as I can see, in all the commentary the main redistribution that is going on here has not been noticed at all. It is not about generational redistribution; it is redistribution within the generations from the poor to the rich.
I shall try to explain this briefly. Half the recipients of care do not pay for it anyway; they have insufficient assets or income so are not affected by this measure either way. Of the remainder, half will be paying for care in a way that counts towards the cap. However, only costs that are strictly categorised as care count towards the cap—what are called hotel costs they will have to pay themselves—so it will take quite a while to reach that £86,000 cap; three years would probably be a generous estimate. On average, people are in care homes for less than three years, so most older people are not going to benefit from the cap at all. Of the rest, most will not benefit from it for long. Some people live in a care home for 10 years and good luck to them, but that is very unusual; sadly, most people will pass on soon after they reach the £86,000 threshold.
Let us think what this means. It is not these older people, for whom we probably have great deal of sympathy, who will benefit from this. There will not be a rash of cruises around the world or teas at the Ritz that they are going to enjoy: where the money actually ends up is in the pockets of their children, to whom they will bequeath it. The poor have to pay for their own homes; the better-off, because of this cap, will find it much easier to buy bigger, better homes, because
they are being saved the cost of Mummy’s care by the Government with this measure. It is redistribution, yes, but it is from the poor to the better-off among the younger generations.
The Tories once described Labour’s plans to pay for care as a “death tax”. Now we have the Tory equivalent: an inheritance subsidy. That is why the case for paying for the cap through a tax on wealth—inheritance tax, capital gains tax, annual wealth tax—rather than through national insurance is so compelling.
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