Care in old age could hinge on weekly pounds 5 now

The boldest attempt yet to solve the problem of paying for long- term care for the elderly was launched yesterday by the Joseph Rowntree Foundation, with a call for immediate free care in old age linked to a new, privately run national insurance system to pay for it in the future.

The package would instantly add pounds 540m to public spending. But over time a huge, privately owned but state-regulated fund of pounds 60bn would build up to pay both for care in people's own homes and for the care and accommodation needed in nursing and residential homes.

Under the deal, many fewer people would have to sell their homes to pay for accommodation in residential and nursing homes. But all the care - from intensive nursing to local authority help in people's own homes - would be provided free at the point of use, as under the National Health Service. And as the scheme matured, many more would have their full costs for both care and accommodation covered by an insurance scheme into which people would pay 1.5 per cent of earnings, paid between the existing upper and lower earnings limits for national insurance contributions.

For someone on average earnings, that would be about pounds 250 a year or pounds 5 a week, broadly in line with the cost of an average car policy or house- building policy.

The package is the result of an 18-month inquiry by a team which included both public and private sector expertise and which received advice, without any commitment to the conclusions, from the Departments of Health and Social Security, and from the Government Actuary.

With Labour and the Conservatives locked into a battle to be the low- tax party, Sir Peter Barclay, the inquiry's chairman, acknowledged that neither was likely to commit itself to the findings ahead of a general election.

But the need to tackle long-term care was "urgent", he said. And the report's proposals, while "radical" seek "a balance in all directions" between the public and private sectors which Sir Peter hoped might allow a cross-party consensus to be built over the coming months.

"It would be very easy to oppose these proposals because they look like a tax," Sir Peter said. "But it is really a very different idea, much more like house insurance, where you may have to pay out nothing or you may face a very substantial bill. It is really the beginning of the welfare state of the future, where everyone is helped but people still have to pay for themselves into a proper insurance fund which will cover the costs they may face."

The scheme draws a distinction between care costs - from home help to nursing - and the "hotel" or accommodation costs, which would remain means- tested. But existing domiciliary services and the care element in nursing and residential homes would immediately become free, adding pounds 540m to public spending.

The insurance would cover both types of costs, which in residential and nursing homes split roughly 50-50. The taxpayer would pick up the tab for the care element where an individual's insurance package was not big enough.

The scheme would be overseen by a National Care Council which would keep contribution rates under review and set care standards, while regulating competing private providers of the insurance fund.

There was, Sir Peter stressed, no immediate cause for panic over paying for care in old age - but from 2015, as the post-war "baby boomers" retired, "there will be a surge in demand for care services".

The package requires today's earners to make provision for their old age and ease the burden on future taxpayers, he said. "In return, they would become entitled to good quality care that was free at the point of delivery. They would also be at far lower risk of losing the family home and other assets that they may wish to pass to their children."

8 Meeting the Costs of Continuing Care. Summary pounds 5 from York Publishing Services, 64 Hallfield Road, York YO3 6LP