Time to deliver Dilnot says former care minister

3 January 2013

Paul Burstow MP has urged the government to defuse the elderly care "time bomb" by concentrating the winter fuel payment on the poorest pensioners and using the money saved to pay for a cap on care costs.

In a report published by the think tank CentreForum, the former care minister calls for the "appropriate legislative levers" to be inserted into the draft care and support bill so that the Dilnot Commission's proposals on care financing can be delivered in full by the end of this parliament.

The report reveals that under the current care system elderly people who own averagely priced homes (£213,000) face losing 65 per cent of their assets to pay for care.

But it is argued that if the government introduced a £50,000 limit on the cost of care, with a £100,000 extended means test, then older people would lose just 22 per cent of their assets.

Paul Burstow said:

"Social care isn't free but it could be a lot fairer for those who have worked hard all their lives."

"Placing a cap on the amount people have to pay for care would protect people from the catastrophic costs they face now. But to make this vital and long overdue change, we have to find the money from somewhere."

"By concentrating the winter fuel payment on those eligible for pension credit we can pay for a cap on care costs."

In addition to Paul Burstow's contribution, the CentreForum report 'Delivering Dilnot: paying for elderly care' includes articles from the Association of British Insurers, Partnership and former chair of the Royal Commission on Long Term Care of Older People, Lord Sutherland.

Chris Horlick, managing director of care at the health insurer Partnership, said:

"Self funders constitute 41 per cent of all elderly people in social care, yet they are among the most overlooked and poorly served in the social care system, which ironically they cross subsidise."

"They suffer not only from a chronic lack of awareness of how to fund their long term care but also where to get appropriately qualified financial advice."

"We believe this report will provide a valuable contribution to the care funding debate and ensure this critical issue is not lost in the long grass."

NOTES TO EDITORS

Key recommendations from the report:

  • We propose ending the universal entitlement to the winter fuel payment and instead linking receipt of this benefit to those who receive pension credit. This would create savings of up to £1.5 billion each year - which we propose should be spent on reforming the financing of care.
  • This policy would incentivise those entitled to pension credit, but not receiving it, to begin claiming - as we would merge the winter fuel payment into pension credit, paying it as a lump sum at wintertime.
  • We believe that a cap of between £50,000 and £60,000 in 2015 prices is the most appropriate level of a capped system of care funding. This cap will work in conjunction with an increased upper capital limit of £100,000 and would ensure a fair and sustainable system of care financing.
  • We agree with the Institute for Fiscal Studies that the relief on capital gains tax at death should end. The current relief is a distortion in our tax code that is not justified, and it is a measure that would raise £600 million a year towards implementing Dilnot's proposals.

The CentreForum report 'Delivering Dilnot: paying for elderly care' edited by Paul Burstow MP can be accessed via this link.

£17bn savings package for the Autumn Statement

19 November 2012

CentreForum, the liberal think tank, has put together a £17 billion savings package ahead of next month's Autumn Statement.

The paper 'Freedom, fairness and responsibility', which will be published on Monday, calls for the government to deliver a package of tax and welfare reforms along with supply side reforms to cut through red tape and boost economic growth.

As well as proposing ways that the government could trim the welfare budget by targeting those least in need of support, the paper sets out a series of innovative measures to make the tax system fairer, simpler and more efficient.

CentreForum has estimated that its proposals would raise over £17 billion a year.

Co-author of the paper Adam Corlett said:

"The government can achieve significant savings without hammering the poor. We urge the government to consider our ideas in the run up to the Autumn Statement."

NOTES TO EDITORS

The CentreForum report 'Freedom, fairness and responsibility: a submission to the Autumn Statement 2012' by Adam Corlett, Tom Frostick and Sean O'Brien can be downloaded.

Executive summary

The Autumn Statement on 5 December is an opportunity for the coalition to reflect on the past two and a half years in government and renew its commitment to the values of freedom, fairness and responsibility.

This paper sets out a number of specific proposals that we would like to see contained in the Autumn Statement. The intent and purpose of the paper is deliberately narrow.

We put forward practical ideas that would realise important savings and additional revenue for the Exchequer at a time of fiscal consolidation.

However, we do not enter into the broader political debate over the government's fiscal mandate or the appropriate ratio between tax increases and spending cuts.

Our proposals deliver tax reforms and marginal savings to the welfare budget, raising over £17 billion in total. We also call for supply side reforms that reduce red tape and boost economic growth.

Fairness and shared responsibility

At the same time as making the tax system broader and fairer, we propose measures that address intergenerational inequities and the relatively painless impact of fiscal consolidation on wealthier pensioners:

  • Make universal pensioner benefits taxable
  • Reduce the maximum pension pot limit for tax breaks to £600,000
  • End the national insurance exemption for richer pensioners
  • We call for different forms of income to be treated more equally:
  • Increase capital gains tax rates to 20 and 40 per cent
  • Introduce an additional rate for capital gains tax
  • Merge the personal allowance and capital gains tax allowance
  • End inheritance tax reliefs for business and agricultural property
  • End the exemption of capital gains unrealised upon death

We propose reform to dysfunctional taxes and unjustified tax exemptions and benefits:

  • Limit statutory maternity pay for the highest paid
  • End the national insurance tax break for self employment
  • Introduce council tax bands I and J
  • End the council tax freeze for bands F, G and H
  • Replace vehicle excise duty with an upfront tax on new cars
  • End the vehicle excise duty exemption for pre-1973 cars
  • Phase out red diesel

Freedom

Finally, we propose a mix of macro and micro reforms that promote economic freedom by removing unnecessary and burdensome red tape:

  • Extend the 'red tape challenge' to cover all government departments
  • Improve access to equity funding for SMEs
  • Unlock the planning system and remove impediments to lending
  • Relax student immigration controls for bona fide institutions

Cross party commission backs CentreForum postgraduate loans scheme

23 October 2012

The independent Higher Education Commission has today recommended that the government "immediately establish a senior level taskforce to examine the feasibility of postgraduate student loan scheme".

CentreForum welcomes this development having called for the introduction of government backed loans for taught master's degrees in its October 2011 report 'Mastering postgraduate funding'.

The think tank's report received positive support from the deputy prime minister Nick Clegg and universities minister David Willetts, who referred to it in his HEFCE annual conference speech in April.

Professor Stephen Lee, chief executive at CentreForum, commented:

"The lack of accessible funding for domestic postgraduates puts the UK at a competitive disadvantage."

"This situation is unnecessary given the funding arrangements already in place for undergraduates. We therefore warmly welcome the new initiative from the Higher Education Commission. A government backed postgraduate loans system will boost the employment prospects of thousands of prospective participants at zero long term cost to the taxpayer."

NOTES TO EDITORS

The CentreForum report 'Mastering postgraduate funding' can be downloaded.

The report proposes a novel way of financing one year taught postgraduate courses based on the system of undergraduate loans. Under this proposal, the government would loan prospective students £10,000 up front and reclaim the money later through income contingent payments. CentreForum's modelling shows that most students would pay back their entire loan after they had graduated. It also suggests that any losses would be outweighed by higher tax revenues from individuals who would not otherwise have taken postgraduate level work.

The recommendations of the Higher Education Commission thus build upon CentreForum's proposal to implement a tax neutral system of income contingent loans accessible to all UK postgraduate students.

Think tank car tax plan would lead to big cut in emissions and lower costs for motorists

3 October 2012

Replacing vehicle excise duty with a one off emissions charge on new cars would cut 2.6 per cent off total UK carbon emissions and lower running costs for motorists, a new report by CentreForum argues.

Under the think tank's revenue neutral scheme, the government would set an annual emissions "pivot point" equal to the emissions of the best performing one per cent of cars the previous year. Cars with emissions below the one per cent level would receive a subsidy. Cars above this level would attract an emissions charge.

CentreForum says its scheme will give car manufacturers a big incentive to produce more efficient vehicles. This in turn will lower costs for motorists, who over time will see a reduction in their fuel costs.

CentreForum has calculated that the scheme will cut fuel use by around 450 gallons over a 100,000 mile lifetime, saving motorists around £2,700.

The scheme will reduce total UK carbon emissions by 2.6 per cent after 15 years, the report says.

Ed Davey, Secretary of State for Energy and Climate Change, said:

"I welcome this report. It is exactly the sort of innovative thinking we have come to expect from CentreForum."

Kate Barker, former chief economist at Ford Europe, said:

"This is a great proposal with strong rationale."

Report author Tim Leunig said:

"More efficient cars save motorists money and reduce global warming. What's not to like?"

NOTES TO EDITORS

The CentreForum report 'Cutting emissions and making cars cheaper to run: a new approach to vehicle excise duty' by Tim Leunig can be downloaded.

CentreForum's analysis is based on 61,000 lines of data on new car sales 2004-2007 kindly supplied by the Society of Motor Manufacturers and Traders Ltd (SMMT).

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