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LGA - National care loans scheme proposed by councils

A new government-backed organisation could be established to run a national care loans scheme to help people meet the cost of care in their old age, local government leaders are proposing.

The deferred payment scheme would work in a similar way to student loans, with people able to borrow to pay for care, but against their estate, to help them manage the shift towards individual responsibility to meet personal care costs

The proposal is set out in a joint submission to government from the Local Government Association, Association of Directors of Adult Social Services and Society of Local Authority Chief Executives.

They also warn that government plans for care reform set out in the Care Bill risk failing a generation unless they are properly paid for. Early indications from local authorities suggest the Government may have underestimated the cost of reform, and already squeezed council budgets will be unable to meet the shortfall.

Councils say that to help keep increasing numbers of older people living in their homes with a good quality of care we need a revolution in the way care is paid for and provided.

Councils are calling for :

  • A greater focus on helping people lead healthy and independent lives for longer. For every £1 spent on care, less than 5p is currently spent on prevention services like community meals and home shares which help people maintain their independence. With council budgets set to have been cut by 43 per cent by 2015, government needs to address the issue of where the extra funding for more preventative work will come from.
  • Clarity from government on how daily living costs including accommodation, (not included in the care costs cap) will be met by those unable to pay.
  • A campaign to tackle low levels of awareness among the public on the importance of making preparations for paying personal care costs in later life
  • A new national body to underwrite the deferred payment scheme.
  • An announcement from the Chancellor in next month's Autumn Statement on how the £3.8billion Integration Transformation Fund for social care will be allocated to councils in 2015.

Under government proposals the cost of care individuals are expected to pay would be capped at £72,000 from 2016, although living costs including accommodation would have to be paid on top. Anyone with non-housing assets of less than £23,250 would be eligible for a deferred payment agreement.

Some councils already deferred payment schemes, with around 8.500 people currently having such agreement in place. The average loan value is £23,000.

However, expanding to a national scheme would place considerable additional strain on already over-stretched council budgets. Local authorities are calling for the financial risk needs to be underwritten nationally.

Sir Merrick Cockell, Chairman of the Local Government Association, said:

"Deferred payment schemes can offer peace of mind to people worried about how they are going to pay for care in old age. This is an option which councils would like to be able to offer to as many people as possible, but we have limited funds that restrict us from doing so.

"We suggest that government considers an option for a separate national organisation, similar to the Student Loans Company, to run the deferred payment scheme on behalf of councils.

"This needs to be part of a huge overhaul of the system that brings care up to a standard fit for the 21st century and ensures that our increasingly ageing population can lead happy, healthy independent lives long into their old age.

"Significant cuts to council funding, and a rapidly growing ageing population, have taken a toll and the quality of care which people are receiving has been compromised as a result. Councils have worked very hard to protect social care services from the full impact of cuts. However, the shortage of funding is being exacerbated by increasing demand and councils need an extra £400 million each year just to maintain services at current levels. To substantially raise the standard of care on a nationwide basis, more money needs to be put into the system."

Joanna Killian, Chair of Solace, said:
"We share the Government's passion for a modern social care system which has wellbeing at its core and would like to commend the Government for the open and collaborative approach it has taken to developing these reforms with councils.  These reforms represent the largest transformation of social care in a generation and we all share the desire to make them a success.
"It is for this reason we echo our colleagues financial concerns. Councils up and down the country are working hard to transform the way that they deliver care and support. However, there is only so far we can go in the face of up to 40% budgets cuts since 2010. If our joint aspiration for world-class care is to be realised these reforms must be adequately funded. This applies to future liabilities as well as to the up-front costs of change.
"We also remain convinced of the need for wider reform of the health and social care system. We need a system which provides joined up health and social care support designed to promote people's wellbeing, enable them to be active members of their community and to maintain their independence where possible. These reforms are a welcome first step on this journey and we encourage government to continue its strong partnership with the local government sector as we all work towards a health and care system fit for the 21st century."

Sandie Keene, President of the ADASS, said:

"Funding is of paramount importance in ensuring that older people's wellbeing, safety and security lie at the heart of a modern, integrated and effective social care system.

"The proposals we put forward today alongside colleague associations will help towards that end although they are not ends in themselves, and must not be thought to be so. Adequate funding for sustained and ongoing training, for example, is still required for us to be able to ratchet up the quality of care we are able to commission and the overall quality of the experience people who use our services can come to expect. It is already high, according to DH surveys. But people have every right to expect that it will get higher.

"The search for a means by which people can unlock some of the equity in their own houses usefully and easily, in a benign financial climate, is important, and one which has been very much helped by these proposals. ADASS commends them to government."

Notes to editor

  • Government announced a £3.8 billion shared budget for health and social care services in 2015.16, shared between the NHS and local authorities, in its June spending round announcement. This was a step in the right direction but is not new money and further investment will be required to create a social care system fit for the 21st century. Government also announced £335 million to help prepare for the reforms including the introduction of universal deferred payment scheme. However this money was top-sliced from existing local government money and the Department of Health has yet to clarify exactly what that is expected to cover.
  • ADASS's budget survey demonstrates that on 4.2 per cent of the adult social care budget (£588 million in 2013/14) is being spent on prevention.


Simon Ward
Local Government Assoication Meida Office
Telephone: 020 7664 3333

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