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Long-term care plan cost 'underestimated'

Posted on 28 January 2014

The sums don't add up in a Government plan aimed at preventing an estimated 40,000 pensioners a year from selling their homes to fund their long-term care.

That is the conclusion of a new report made for hundreds of local councils. It said the plan could fail because the Coalition’s calculations “massively underestimate” the cost.

The plan is at the heart of the ministers' reform of the care system.

It is aimed at anyone facing the likelihood of having to sell their home to pay for care. The scheme will enable them to borrow the cost of the care bills from the local authority.

This cash would then be recovered from their estate after their death.

The Government was accused of betraying the old in 2013 when it became clear that the “universal” initiative will not be available to those with savings and other assets over a set level.

Now the Local Government Association, the voice of nearly 400 town halls in England and Wales, has calculated that it could cost up to five times more than official estimates indicate, the Telegraph reports. 

The association predicts that town halls will collectively have to set aside £1.1 billion to run the scheme within a decade.

The forecast is based on local authorities' own planning estimates.

The association calculates that assumptions in the Government’s own impact assessment about how much the elderly will have to borrow and for how long indicate the scheme would cost only £230 million per annum.

But the Department of Health dismissed these estimates.

It said that the scheme was focussed on being cost neutral within a few years, adding that it has set aside £110 million start-up costs to assist councils.

Sir Merrick Cockell, chairman of the LGA, a former Conservative leader of Kensington and Chelsea council in west London, said the plan could endanger bankrupting councils if take-up is too large.

He said: “The costs for running the deferred payment scheme have been massively underestimated by the Government.”

Sir Merrick said that councils are at “real risk” of incurring costs “that they simply cannot meet” with costs likely to top £1.1 billion.

The LGA is calling on ministers to contemplate launching a separate national organisation, comparable to the Student Loans Company, to supervise the deferred payment scheme on behalf of councils.

The Government's planned scheme is based on recommendations of a landmark commission chaired by the economist Sir Andrew Dilnot.

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