Leader: Why didn't you save more, Grandpa?

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Few fit and healthy young people spare a thought for how they might pay for the meals on wheels, or the residential nursing home 50 years down the road. About one in five people are likely to need long- term care once they retire. But planning for that eventuality is not high on most people's lists of priorities.

Our population is ageing; the burden of long-term care is growing. According to a report released yesterday by the think-tank IPPR and the economics consultancy London Economics, the number of people in need of long-term care will rise from 2.2 million today, consuming 6,600 hours of care a year, to 3.3 million, needing 9,700 hours in 2031.

The current system is likely to come under increasing strain. At the moment only those with assets worth less than pounds 16,000 are eligible for government support. Everyone else is obliged to fund their own care - and, if necessary, to sell their assets (usually their house) to do so. This year 40,000 people will be forced to sell their houses to pay for care. Relatives expecting to inherit a nest egg are losing out. Conservative backbenchers claim to have post bags full of complaints.

All would be well if everyone decided to take out insurance to finance their care, should they need it. The trouble is that most people cannot afford to do so or will not. Given a choice, most people would prefer to spend their current income rather than put it by to guard against a risk at some distant point in the future. So a voluntary insurance system is full of pitfalls. Yet expecting the taxpayers of 2031 to fork out for the steeply rising costs of their grandparents' care seems increasingly unfair.

So this is the trap that we are in: we expect government to make sure the supply of long-term care will rise to meet demand and yet we baulk at the prospect of paying more taxes. There are two escape routes. The first would be a sweeping reform to introduce compulsory insurance for long-term care for everyone. It does not matter whether this is administered by the state or the private sector. The purpose would be to make the current working generation save for their future likely needs. The size of the insurance premium would depend on ability to pay; the state would step in to build up credits for the unemployed. It would not be a tax; it would be saved to pay for future care.

The second approach would be to encourage the creation of a new private insurance market for those with assets, who could pledge a portion of those assets to fund an insurance policy for their old age. The state would continue to provide for those who cannot afford their own care.

Whatever the details of policy, the fact is that as a society we will have to devote more resources in the next 40 to 50 years to caring for the elderly and ill. The state cannot afford to stand by and just hope people will provide for themselves, but any intervention would be extremely politically sensitive. We need new and imaginative schemes, of the kind outlined by the IPPR, to bring together the public and the private - and we need to start work on them soon.

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