Out of the window, a lifetime's comfort

"I want to see wealth cascading down the generations. We don't see each generation starting out anew with the past cut off and the future ignored ... we must go much further in encouraging every family to save and to own; to extend every family's ability to pass something on to their children; to build up something of their own, for their own."

The words are John Major's at the 1991 Conservative Party Conference. For growing numbers of families with elderly relatives they have today an increasingly hollow ring. For many, the inheritance dream is over.

Over the past decade and more, the definition of what the NHS will provide in terms of continuing care has been narrowing and tightening. Rising numbers of elderly, longer life expectancy and cash-limited budgets have encouraged hospitals to concentrate more on the curable, less on long- term care.

In addition, huge, and originally unplanned expansion in private residential and nursing homes, most of whose residents were funded by social security, allowed health authorties to transfer continuing care from the NHS to the social security budget. Long-stay elderly beds closed by the thousand, more and more severely dependent people were discharged from hospital to means-tested care elsewhere.

For those with little capital and less income, such arrangements have often worked well. But the effect of the means test is that those who have saved, built up their own pensions and bought their own homes are seeing their assets vanish at the rate of £15,000 to £20,000 a year if they need long-term care. With the average stay in a home variously estimated at 18 months to three years,£20,000 to £60,000 may have to be found, much more for those who live beyond the average. Spouses can find themselves impoverished, reduced to income support after a lifetime of saving.

Where only one partner survives, the home itself can be swallowed up in charges, no wealth left to trickle down to children. The income of lawyers who can work out how to disperse assets to avoid charges is rising. And the anger of the thrifty is becoming palpable. People have paid their contributions, but the free care they believed they were entitled to is not there. For those affected, the inheritance dream is over.

This week's new NHS guidance has put a welcome finger in the dam. Its definition, however imprecise, of the NHS's commitment to continuing care, means those health authorities that have baled out of it almost completely will have to re-provide services for the most dependent - supplying them direct, buying places in nursing homes or providing nursing and other NHS support in individuals' homes.

But that guidance is not on its own a long-term solution, for the weight of water behind the dam remains huge. The numbers aged over 85 - those most likely to need nursing and residential care - rose from 550,000 to just under 900,000 between 1981 and 1991. By 2001, the numbers will reach 1.3 million and by 2051, three million people will be aged 85 and over.

So what can be done? Things could stay as they are. For the time being a lucky 10 per cent or so will get a free NHS bed, where those still exist. The remainder, if they die quickly and cleanly, will pass their inheritance on. Those unlucky enough not to will not. The inequities of the present system will continue.

Alternatively, private insurance could be encouraged. For those under 40, £30,000 or so of long-term care can be bought relatively cheaply. Here the apparent end of the property boom could even help: if house prices are never again going to be the one-way escalator to wealth, the relative proportion of people's income spent on housing should decline. This may be produce less wealth for the next generation to inherit, but it should free more money for people to invest in their own long-term care.

But many factors work against private insurance as a solution for all. Job insecurity is everywhere. Relentlessly we are told the future pattern of work is likely to be many more job changes, many more jobs on short- term contracts, many more people experiencing spells of unemployment. Private insurance requires regular payments: default, and the insurance dies. And those with lower earnings are least able to pay.

At the other extreme, a new social insurance for long-term care could be developed. The NHS would remain free at the point of use and funded largely from general taxation. But a new national insurance would cover long-term, non-medical care. The options within that are legion. It could cover all or only part of the bill. It could be a funded scheme, rather than the existing pay-as-you-go national insurance. The contributions would go into a fund which gradually built up, individuals' claims on it growing the longer they had been held. It would mean higher taxes but less means-testing. Less wealth would be available for individuals to save and, if their luck holds, pass on. But fewer people would see all or most of their assets destroyed by ill health at the end of their lives. The winners in the lottery would win less. But the losers would lose less, too.

These are deeply political choices, although combinations of the approaches are possible. But they have to be faced. For if larger pensions will be needed for longer lives, if those buying into housing will not see large capital gains, if bigger provision has to be made privately for long-term care, and if inheritance proves less widespread than seemed likely in the eighties, there could be far-reaching implications for how we plan and live our lives.

Will renting return as a safer option than buying in a more uncertain world? And what will that do to inheritance? Will the increasing trend to split property and pension rights more equally, as families break and remake, produce ever smaller parcels of wealth to fund retirement and long-term care - not to mention bequests? How will those now happy to live with uncertainty react if the cushion of inheritance is to be thinner?

Among so many unknowns the question will emerge with renewed force of whether people want to hang together with collective provision - at the price of higher taxation - or if they will prefer each to take their chance on their own.

One way or another, old age and long-term care will have to be paid for. And whichever way it is done, less individual wealth is going to be there to inherit.

The comfortable, easy assumption of the 1980s - that in a property-owning democracy wealth for all would cascade down the generations - has gone. For some it still will. But not for others. The new world of work and the joys of a longer life have seen to that.