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Boris Johnson suggested the insurance industry could protect people from having to sell their homes to pay for the cost of care, as he faced a backlash over his £12 billion-a-year reforms.
The Prime Minister was pressed by Labour leader Sir Keir Starmer in the Commons over how his plan could meet the Tory election pledge that nobody should be forced to sell their house to pay for care.
Mr Johnson said his plan to cap care costs in England at £86,000, paid for by a new tax, would allow insurance firms to come up with products to protect people’s assets.
Questions over how the new scheme will operate came as the Resolution Foundation economic think tank criticised the plans for being unfair across the generations and offering more benefits to wealthy southern households.
As MPs packed into the Commons for the first Prime Minister’s Questions since the lifting of coronavirus restrictions, Sir Keir said: “Someone with £186,000, if you include the value of their home – that is not untypical across the country in all of your constituencies – facing large costs because they have to go into care, will have to pay £86,000 under his plan. That is before living costs.
“Where does the Prime Minister think that they are going to get that £86,000 without selling their home?”
Mr Johnson said: “This is the first time that the state has actually come in to deal with the threat of these catastrophic costs, thereby enabling the private sector, the financial services industry, to supply the insurance products that people need to guarantee themselves against the costs of care.”
Asked later whether this meant the Government would encourage people to take out insurance so they would not have to sell their home to pay for care, the Prime Minister’s official spokesman said: “The private insurance market will now have the ability, because of the certainty provided, to come forward.
“It’s not for me to say what actions they will take.”
MPs will vote on the plans on Wednesday, with the Prime Minister set to meet Tory backbenchers in a bid to win over potential rebels opposed to the manifesto commitment-breaching tax rise.
Health Secretary Sajid Javid said the decision to abandon the election pledge in order to provide £12 billion extra a year for the NHS and adult social care was the sign of a “responsible and serious government”.
The £86,000 cap on care costs will be of most benefit to those in the South of England. Not only will they see a greater share of their total assets protected by the cap, higher care costs mean they are also more likely to reach the cap and then receive state support. pic.twitter.com/x4r8HdPh03
— Resolution Foundation (@resfoundation) September 8, 2021
But he acknowledged the extra money may not be enough to clear NHS waiting lists.
The Commons clashes came as experts continued to pore over the details of Tuesday’s tax hike, based on a 1.25 percentage point increase in National Insurance from April 2022.
The Resolution Foundation said the new system was generationally unfair because the bulk of the money comes from working age people.
Although the levy will hit the earnings of working people above retirement age from April 2023, the think tank said only one in six pensioner households have earnings while two-thirds have private pension income that is not covered by the new tax.
The levy also excludes other sources of income such as rental income from buy-to-let homes.
The think tank said the £86,000 cap on care costs will be of most benefit to those in the more affluent south of England, as they see a greater share of their total assets protected by the cap and higher care costs mean they are also more likely to reach the limit and benefit from state support.
But poorer parts of England could benefit from the new means test, which sees care costs covered for those with assets under £20,000, and help available to those with up to £100,000.
The think tank said in the North East only 29% of individuals aged over-70 have sufficient assets that they might receive no state support, compared with almost half in the South West.
But the foundation warned that many people might still need to sell their home to pay for care if they do not have significant other assets.
Resolution Foundation chief executive Torsten Bell said Mr Johnson “has turned his back on low taxes in favour of an NHS-dominated state”.
He added: “The tax rises that will pay for a bigger NHS are generationally unfair, excluding rich retirees while prioritising wealthy landlords over their tenants.
“And while the social care cap will prevent people being hit with catastrophic costs, it will benefit southern households far more than those living in Red Wall seats.”
However, the Prime Minister’s official spokesman said: “Diseases like dementia affect families up and down the country.
“This is an approach that provides certainty for people up and down the country, it is an approach which is progressive, which sees those who have more pay more.”
Health Secretary Sajid Javid earlier defended the package, telling the BBC: “These are the acts of a responsible and serious government.”
He said that “doggedly” sticking to the manifesto commitment could have led to 13 million people being on NHS waiting lists in three years’ time as a result of the backlog built up during the pandemic.
Asked if the money would clear the backlog, Mr Javid told Sky News: “No responsible health secretary can make that kind of guarantee.”
He added: “What I can be absolutely certain of is that this will massively reduce the waiting list from where it would otherwise have been.”
The measures announced on Tuesday will see taxes at their highest-ever sustained share of the economy, the Institute for Fiscal Studies economic think tank said.