Anthony Hilton: There's a real headache in the true cost of paying for long-term care for elderly
Local authorities foot the bill for a lot of sports facilities but many see it as an optional extra
Saturday 04 February 2012
Andrew Dilnot, soon to be Warden of Nuffield College, Oxford, and one-time head of the Institute of Fiscal Studies, wrote a report last year on how society should handle the cost of the long-term care one in four of us will need towards the end of their lives.
His core suggestion was that there should be a cap on what individuals should be expected to pay out of their own pockets– at £35,000 – with the state footing the bill after that.
In a rare interview on Tuesday, Dilnot revealed that while Whitehall did not find fault with his report, it is worried about the cost, and looking either at a much higher cap or at a means test.
The perception is that most people needing care have a significant amount of money tied up their home, so they could afford to pay. Perhaps they could, but it may not be that simple. The healthy one of the couple still has to live somewhere.
But the real problem is that the true costs are far higher than people realise. What is lost in the debate so far is the understanding that when people go into care, they are hit by two separate charges.
One is the cost of care – the nursing and the drugs; the other is the hotel cost, which is for the accommodation, cleaning, heating and food. Dilnot is only talking of covering the care cost but in fact the hotel costs are massively bigger — they can often be two or three times as much.
Annual costs for good-quality homes are currently around £50,000, but the care cost within that is typically around a third, or £17,000. On this basis, it would take a couple years for the care bill to get to the level where it would pass over to the state.
By this point, the patient would in fact have paid £100,000. Thereafter, even if the state paid in full for the care, the individual would still have to find £33,000 a year for the accommodation.
At the moment about 10% of people who go into care survive more than two years. Many need between £150,000 and £200,000 to get looked after in the last few years of their lives. People talk about the pensions problem – but long-term care threatens to be every bit as difficult.
University fees' silver lining for sports firms
Last week, I stayed for one night at a cost of £30 in a comfortable bed and breakfast in the North of Scotland, and it provided free broadband.
On Monday, I attended the annual conference of Sapco – the trade association for firms that supply tennis courts, artificial pitches and other sports-related facilities – at the Marriott Forest of Arden, a country hotel near Coventry.
It has golf courses that are good enough to stage the British Open, and charges £175 a night, but demands £6 an hour for use of the internet. It could learn a bit about customer service from the bed and breakfast. The Scottish breakfast was better too.
It was not the only reason delegates were unhappy. Local authorities foot the bill for a lot of our sports facilities but, even with all the talk of the sporting Olympics legacy, many regard it as an optional extra.
The cuts have been pretty brutal, and often short-sighted. But there has been an unexpected dividend elsewhere. Soaring tuition fees have left many universities struggling to attract students, and the more enterprising have realised that competition is not just about academic excellence, it is also about the quality of the student experience and for some that means the athletics track and tennis courts.
Who would ever have thought that university tuition fees would be a lifeline for the suppliers of sport facilities?
Fund managers in a two-way pull
One sunny day last summer, I was invited by Business Secretary Vince Cable to give him my thoughts on executive pay and what might be done to bring it back under control.
At the same meeting were Sir Roger Carr, president of the CBI, Will Hutton from the Work Foundation, others from the Trades Union Congress and the National Association of Pension Funds, and one of the leading figures in UK corporate governance, Anita Skipper of Aviva Investors.
It is hugely ironic that within days of Cable going public with his ideas and how he wants shareholders to be much more assertive in keeping rewards in check, Skipper's department should be closed down.
Aviva Investors announced on Tuesday that it had to save money, that it was making 12 per cent of workforce redundant, and was reducing its commitment to UK equities and streamlining its approach to governance and socially responsible investing.
Skipper becomes an adviser to Steve Waygood, who fills a new role as chief responsible investment officer, but however diplomatically this is dressed up in the private letters Aviva Investors has sent round the City explaining the move, she looks like a Skipper without a ship.
Certainly, Waygood's group is going to have to spread itself much more thinly and across more asset classes than Skipper's team had to.
It is an uncomfortable reality check – the more so as just before Christmas, Henderson Global Investors, another of our very large investment groups, announced that it was integrating its socially responsible investment activities into the mainstream, again to save money.
There is, of course, a lot to be said in theory for fund managers to take direct responsibility for the governance side of their craft but the trouble is it has never worked in practice. This time it may be different, though I would be unwilling to bet on it.
Meanwhile, there is no getting away from the fact that at the very time when political pressure is on the fund management community to take more responsibility and act as owners, the need to make a profit is pulling the other way.
If the biggest insurance company in the country feels it cannot afford to maintain its commitment to governance at current levels, what price the rest of the fund management industry?
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