Labour's tax rise to pay for care homes

Labour is considering a plan to raise National Insurance contributions to fund a guaranteed minimum level of care for the elderly, The Independent has learnt.

The aim would be to end the current "postcode lottery" over the services provided to the elderly in their own homes, and to avoid the need for old people to sell their property to fund expensive care home fees. Ministers describe these issues as "unfinished business" from when the modern welfare state was set up by Labour after the Second World War.

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The Government will set out its initial thinking in a Green Paper on long-term care next week.

An expansion of social care is emerging as one of the "big ideas" for a fourth term to be included in Labour's general election manifesto.

Under the plans, social care would not be nationalised, but tailored to individual needs through different providers.

It would be brought into line with the NHS, so that people would know what support to expect, ending the anxiety and uncertainty caused by the existing patchwork system. No decisions have been made, and ministers want a big national debate first.

The options include funding a basic national standard of care through a one-off payment by individuals of about £12,000 – either when someone retires or taken out of the estate when they die. However the option most favoured by ministers at present is an "earmarked" rise in National Insurance contributions, similar to the one Gordon Brown introduced as Chancellor in 2002 to boost the health budget, which won public support.

Although all workers could be expected to pay into a national social care "pool", higher earners would pay proportionately more than those on low incomes.

Ministers are wary about imposing what would be seen as another tax hike, and insist that any rises would not take effect for some years. National Insurance payments for all workers are already due to rise by 0.5 per cent in 2011, to help fill the black hole in the public finances.

Andy Burnham, the Health Secretary, told The Independent that his goal was to extend the principles of the NHS to social care so that people could enjoy a "basic entitlement".

He said: "It is a major personal priority to me to put ideas on the table about how to make social care much fairer. There is a real unfairness in how we provide it, which is a major concern for people.

"We need to ensure there is not so much local variation. There is a real need for bold ideas to transform the quality and fairness of the system."

He added: "My aim would be: is it possible to run social care along the same lines as the NHS, as a contract between the person and the state?"

Mr Burnham said he also wanted to "invest more" in the staff working in social care.

Ministers will contrast their idea of a national standard with the Tories' instinct to leave people to "fend for themselves". But the Tories will accuse Labour of dithering on the issue during 12 years in power, saying that there is no chance of reform before the election.

The Green Paper will acknowledge the need for a "fairer, simpler and more affordable" system that is fit for an ageing population, and will urge younger people to join the debate on how to fund it.

About 400,000 people receive care in their own homes – such as home helps – from local authorities or private agencies. Fees paid for these services have risen by an estimated 45 per cent in the past two years, with huge variations in different areas. Home care is free in Scotland.

Most councils do not pay for care if someone has assets of more than £23,500. Under this means-tested system, 30 per cent of people who go into a care home have to pay their own fees. The average stay in a home is two years, with an average bill of £25,000 a year.

A public consultation by the Department of Health found widespread ignorance about the system and a lack of a single point of information. Almost half the people consulted expected social care to be "free" like the NHS. Many wanted "peace of mind", to know the cost of care, and were worried about not being able to pass on their property to their families when they die.

An extra 1.7m people will require access to social care over the next 20 years, the Government estimates.

Average life expectancy has risen from 66 years in 1946, when the welfare state was created, to 78 today. It is predicted that a girl born this year could live to be 126. The number of people over 65 now outnumbers the under-18s for the first time. The ratio of people in rather than out of work, now 4:1, will fall to about 2:1 by 2050.