My Lords, I think all five of the non-governmental amendments in this group are down to me, so I crave the Committee’s forgiveness if I am not the soul of brevity on this occasion. All the amendments refer to the Government’s proposed universal deferred payment scheme.
I start by reminding the Committee of the background to this scheme. Its origins lie in the proposal made by a minority of the royal commission of 1999. We—my noble friend Lord Joffe and I—were concerned with one clear defect of the means-tested system. It meant that people were forced to sell their homes to pay for care. The Daily Mail banged on about this practically every week, and it was right—I never thought that those words would escape my lips—to do so. However, we also felt that it would be wrong that people needing care could simply hang onto their homes and eventually bequeath them to their families without spending any of the capital that those homes represented to pay for their own care. Therefore, we proposed deferred payments—local authority loans secured against the value of people’s homes and repayable only when the home was sold, often after the person had died.
Every politician that I have ever discussed this with sees this as a no-brainer. Unfortunately, officials at both local and national levels over the years—I do not of course make this charge against any officials on the current Bill—have taken a rather different view. They could not understand why anyone would hang onto their house when they were living in a care home and they did not want to see valuable homes left empty. The emotional side occasionally escaped them.
The Labour Government nevertheless brought in a scheme to allow deferred payment, but it was essentially sabotaged. A decision was made that no interest should be paid on the loans, and that gave local authorities a financial incentive not to make them. Then many local
authorities refused to put schemes in place. If they were challenged in the courts, they lost, but how many people wanted to mount such challenges? Or they denied individual applicants who could succeed only if they showed stamina and determination and lived long enough to see them through.
The result is that the deferred payment scheme has been, if not a complete failure, not by any means a success. There are about 8,000 deferred loans outstanding, which is around 2% of the number of people in care and maybe twice that for self-funders. Most of the schemes are short-lasting in practice. The old person takes out a deferred loan and maybe they hope they will get home after a spell a little longer than the 12 weeks allowed in law to make a decision. Eventually they see that they will not be able to return to their own homes and the deferred loan is brought to an end. It performs a very useful function for the old person in giving them time to think, but the schemes are fairly short-lasting.
I am delighted that the Government have decided to complete the work that was half-botched in the 2000s and which Dilnot endorsed—a universal deferred payment scheme that actually works. The amendments in my name and one in my name and that of my noble friend Lord Warner are designed to refine the Government’s proposals to make them work even better still.
Amendment 92ZZV gets rid of a suggestion in the Bill that people should in some circumstances require third-party guarantees on the loans as well as their being secured against the value of the home. That is belt and braces and I do not see why families should be providing braces when there is a perfectly good belt in place. It would particularly apply when the deferred payment is secured on where somebody else—perhaps the old person’s son or daughter—lives. At the moment, case law provides that a local authority cannot in those circumstances force the sale of a property in order to redeem a mortgage on that property when somebody else lives there. However, if a guarantee was sought from the co-owner, the guarantor could be in a position where they are expected to repay the individual’s care costs based on an unrealisable value of half of the property they live in. This provision may put off people who would otherwise have taken advantage of the scheme and I ask the Minister to look at it again.
Amendment 92ZZW limits the interest rates that local authorities can charge on deferred payments to MLR plus 2%. This is to prevent local authorities attempting to sabotage the new scheme as they sabotaged the previous scheme. They could otherwise do so by charging Wonga rates of interest and this amendment will prevent their doing that.
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Amendment 92ZZX concerns the administrative difficulties in the scheme for local authorities. At the moment, it seems that each local authority will have to design and implement its own scheme which, as well as being extremely wasteful, will lead to lousy schemes as well as good ones. The amendment requires the Government to design a model scheme and to provide
with it the associated software to local authorities, otherwise the deferred loan may become a new kind of postcode lottery, where what you get depends on where you live and not on your needs.
Amendment 92ZZY requires that loans are made available not only to pay care home fees but to pay for private sector point-of-need insurance policies. Even with the cap in place, care fees can be expensive—individuals have to find not only hotel costs but the excess over what a local authority will pay for them in a care home—and point-of-need insurance policies are a form of protection against this if it goes on for a long time. They are policies that you take out when you go into a home and they go on paying out for however long you are in there. They are a sensible way for people to manage this expense. I believe that, over time, the standard recommendation of independent regulators and financial advisers for self-funders going into residential care will become, “You need this or you are still at risk, even with a cap”. However, they are expensive and, as their home is the main asset that many old people have, it is important that the local authority lends against its value under the deferred payment scheme to fund the purchase of such policies. If it does not, people will have a choice: either take out a point-of-need insurance policy, which means you have to sell your home; or do not sell your home but you cannot then have a point-of-need policy.
Finally, and perhaps most important, Amendment 92ZZZ, in my name and that of my noble friend Lord Warner, a member of the Dilnot inquiry, seeks to defer the start of the deferred payment scheme from 2015 to 2016. Conceptually, deferred payments are simple; practically, they are highly complex.
Let me give a brief digest of a speech that Chris Horlick of Partnership, one of the leading firms in this area, made recently about some of the issues which arise. Will a citizen be allowed to choose a care home even if it costs more than a local authority usually pays, and to what level? Is there a perverse incentive for local authorities to put citizens into a residential setting because the loan will be paid for by the DoH, whereas care at home would be a burden on the local authority? Who will value the home? Who will pay the cost of the valuation? Who is responsible for maintaining the home when the person is in care? Can it be let? By whom, to whom and at what rent? What about owners with dementia; who will sign the deferred payment agreement? If there is not a power of attorney in place, what happens then? Who pays if the house is burgled, squatted, burnt down? Whose responsibility is it to insure the property? Who provides financial advice? Who pays for financial advice?
Further important questions arise from the Government’s consultation paper Caring for our Future, published last week. Would noble Lords like me to go on? I suspect not. However, I have established the basic point that these schemes are not simple.
Moreover, there is another huge decisive advantage in deferring the new scheme until 2016 in that it will then come in simultaneously with the cap. The two schemes are intimately related and they need to start at the same time so that people can look at their position holistically. It might make sense for someone to take out a deferred loan in 2015 when they are
available, but it will not make sense for the same person to take it out in 2016 when there is a cap coming into play. Really, the difficulties of comprehension defy imagination. You are talking about older people, some of whom will not be as mentally agile as they were in their younger days, and you are trying to explain to them two schemes, both extremely complex and with ramifications for their and their families’ futures that are very complicated to understand. At the end of it all, you have to explain that these are coming into effect at completely different times. It really is an unnecessary complication—“Election day looms, so rush”.
We know that the Minister has the interests of older people in mind. He really should think again about this and give it an extra year so that both schemes can be introduced at the same time. If there is a short delay, most older people who want to will be able to take advantage of the existing scheme anyway, at least to bridge the gap.
As I said, the proposal in the Bill is a good scheme and I welcome it warmly. But if the Government steam ahead regardless with the 2015 date, it could turn into a botched scheme, leading to confusion rather than relief for thousands of older people. This is a case where the adage “more haste, less speed” undoubtedly applies. I beg to move.