Leading article: Social care needs to be fairly and efficiently reformed

It is painfully apparent that the present system for allocating social care to the infirm elderly is confusing, overly complicated and riddled with unfairness. Under the present means-tested system in England and Wales even those with relatively modest savings find themselves forced to pay for the full cost of care. And those who do receive public support are also treated badly. Since many local councils have inadequate capacity to offer home help there has been a pernicious tendency to force the elderly into nursing homes, despite the fact that many would be happier and healthier receiving care in their existing abodes.

So what is the solution? Some argue that the answer is to sweep away all means testing and for the state to take on the full burden of funding long-term care for the elderly. A "free" system would have the attraction of simplicity, but not affordability. A significant increase in publicly-funded social care is simply not sustainable given the precariousness of the public finances and the projected increase in the age profile of the population over coming decades. At the moment 1 in 4 of the population is in retirement. By the middle of the century the ratio is on course to be 1 in 2. That is a precariously small tax base on which to build a massive extension of the welfare state.

The argument that England should follow the example of the Scottish parliament, and subsidise care for all, looks especially unconvincing given that the Scottish audit commission revealed last year that the generous system north of the border is under growing strain too.

The new Health Secretary Andy Burnham presented a Green Paper yesterday, laying out the Government's various ideas for reform. Mr Burnham seems keen to present this as a radical step. But the reality is that sound proposals for reform have been gathering dust around Whitehall for years. The Government commissioned a review of how to fund long-term care of the elderly led by Sir Stewart Sutherland, which came up with numerous recommendations, as long ago as 1999. And the Government's social care adviser, Sir Derek Wanless, produced a report on the subject three years ago.

As the Wanless report argued, an overhauled system of mixed public and private provision is the fairest and most efficient way forward. The state should guarantee a basic minimum level of social care, and individuals should top it up. While this would replace the unfairness of means testing with the inefficiency of the wealthy being partly subsidised for their care, the latter looks the lesser of two evils.

However, the popular idea that the equity in the house of the social care recipient ought to be sacrosanct is profoundly wrongheaded. There is nothing fair about taxpayers subsidising the care of an elderly person, only to see the value of their biggest asset pass to their family upon death. The challenge for the Government is to tap that store of value humanely. The present system in which councils force the elderly to sell their homes up front is traumatic and unnecessary. The idea in the Green Paper of councils taking a single payment from their estate after death sounds fair. And some form of social care insurance scheme is also worth exploring, given the inherent uncertainty that surrounds our longevity.

Dealing with the fiscal consequences of an ageing society will be one of the great political challenges of our time. To meet that challenge we will need clear and radical thinking. And unless we get the reforms in motion without delay we risk betraying not only our infirm elderly, but future generations of taxpayers too.