Taxpayers may have to pay new levy to meet future cost of care homes

Taxpayers may have to pay an "old age care levy" to help fund the nursing homes of the future. A groundbreaking report commissioned by the Government will recommend next month that it must significantly increase the amount it spends on the elderly.

The proposal raises the prospect of a new or increased tax rate to help to pay for an aging population, as the Government looks for a new way of funding care for the elderly and adults with disabilities in 2012.

At present the state, through local councils, funds residential care home places only for people with assets of less than £23,000 a year. But Andrew Dilnot, the chair of the Commission on Funding of Care and Support, told The Independent that such an arbitrary cut-off rate was unfair. He said it resulted in some people being forced to sell their homes and spending in excess of £100,000 on nursing care.

"There's a big problem here – because the amount of money [that people need to spend on care] can be very, very high indeed.

"If you look at 65-year-olds today, a quarter of them will not have to spend anything on their care needs but one in 10 of them could be looking at cost in excess of £100,000 over their life and that's a really big sum," he said. "That's what leads to people's concern about the unfairness of the current system. The question is what do we do? How can we make the system work better."

Mr Dilnot, a former head of the Institute of Fiscal Studies, said the commission had concluded that in future the taxpayer must take on more of the burden – but combined with individual contributions.

"We have already ruled out apurely tax-funded regime and the reason we have ruled that out is that because of the squeeze on public finances," he said.

"The other extreme is just relying on the private insurance model – and that's where we are now. It doesn't work because the private insurance companies don't want to take all the risk and uncertainty – they are just not interested.

"What we are looking at is the space in the middle – saying, what sorts of ways might there be of sharing the responsibility between the state and the individual? So we can have cover against the risk without the state having to take the whole burden on."

Mr Dilnot also hinted that the responsibility for care homes might be removed from local councils and could be merged with the NHS to make efficiency savings.

"Social care is the last vestige we've got of the poor laws. Its still run by local authorities because that's what was decided in 1948 – it seemed like the natural thing to do because it was not an issue on anything like the scale that it is today," he said.

"My own feeling is that the system we have at the moment is not one that we can be very proud of. It is inefficient and ineffective. It is complex and there is a lack of integration across bits of the public sector."

The Commission has to submit its report to the Social Care Minister, Paul Burstow, by July.

More than 250 organisations, including local authorities, charities and think- tanks, have responded to its call for evidence.

Mr Burstow has indicated that the Government intends to legislate for a new way of funding care for the elderly and adults with disabilities in 2012.