Richer pensioners should lose some benefits, says thinktank

Nuffield Trust says rethink on winter fuel allowances, bus passes and TV licences would help pay for rising social care costs

Better-off pensioners should lose some of their benefits, such as winter fuel allowances and free bus passes, and face higher rates of tax to raise cash to pay for the country’s social care system, according to an analysis by an influential thinktank.

In its report, Reforming Social Care, the Nuffield Trust argues that to cope with an ageing population and to limit elderly people’s exposure to catastrophic costs, care budgets will have to double to more than £25bn in a decade.

To meet the extra costs, the report says ministers should consider cutting “universal benefit payments to older people with higher incomes and wealth”. The result would be richer pensioners forgoing winter fuel payments, free TV licences and free bus passes, saving £1.4bn a year.

Arguing that pensioners’ average income has grown by 47% over the past 11 years – more than three times earnings – and that almost three-quarters of over-65s now own their home, the trust says that “the government should explore options to direct the burden of any tax increases on to wealthier older people”.

But the issue is politically explosive. In opposition, Andrew Lansley ran a campaign attacking the then health secretary Andy Burnham’s proposals to fund free personal care as a “death tax of up to £20,000 per head which would be levied on the estates of grieving families”. The two men have now swapped jobs, with Lansley now in government.

The Nuffield Trust says it is time to consider “a 5% tax on all estates above £25,000 [that] would yield around £3bn a year” – hard for a government reeling from claims that its budget smuggled in a “granny tax” that penalised pensioners.

Anita Charlesworth, the trust’s chief economist and former director of public spending at the Treasury, told the Guardian that such a “flat inheritance tax” should be considered. “The social care system is creaking at the seams and it’s only going to get worse,” she said. “We are going to have to take some substantial decisions and it’s fair to start a debate with older people about the different ways the state can tax and support them.”

Charities welcomed the report, saying it was needed in “opening up an honest debate about how the government and individuals need to plan for a new sustainable system of paying for social care”.

Michelle Mitchell, charity director of Age UK, said: “As the government prepares to publish the white paper on social care and a progress funding report, it is vital for the three main political parties and government departments to reach agreement on the scope and scale of required funding reform.”

The government has yet to respond to the Dilnot report, which argued that lifetime costs for social care needed to be capped at £35,000 and that council-funded home help and care home places for elderly people and adults with disabilities should be offered to everyone with under £100,000 of assets, up from the current limit of £23,250. However, the Treasury has baulked at the £1.7bn a year cost of the proposed changes.

A forthcoming white paper will instead focus on the legal duties councils have to elderly people. The government claims all-party discussions have yet to yield consensus over the issue, let alone a solution.

The Nuffield Trust says the state spends £140bn on “services and support” for older people but “just 6% of this was spent on social care” – this at a time when local authorities have systematically been reducing access to care, leaving a third of elderly people to manage on their own.

Charlesworth said, as a first step, the £1.5bn “underspend” in the NHS should be redirected to pay for social care, noting that £500m had instead been used to pay off the deficit in the March budget . “This has the benefit of preventing the elderly blocking beds in hospital if we keep them out through social care spending”.

Sarah Pickup, president of the Association of Directors of Adult Social Services, said: “If policy means to get people cared at home then there has to be a cap on those charges. At present there is not. The biggest wealth is in mortgaged assets and older people need to bear the costs. It’s extremely difficult to do but politically we have to do it.”