I am grateful to the noble lord, Lord Lipsey for his amendments. He has a unique perspective, having first put forward the idea of deferred payments—as he reminded us—when a member of the 1999 royal commission. The Government share his disappointment that deferred payments are patchy and inconsistent across the country. Many people going into care face difficult decisions as a result, and authorities lose money when they offer a deferred payment because they cannot charge interest.
We also share the noble Lord’s commitment to ensuring that deferred payments work better in the future. We agree with the Dilnot commission that deferred payments should become a full and universal offer across the country for people who have to sell their homes to pay for residential care. We intend the scheme to be cost neutral to local authorities, as the commission also recommended.
We are proud to introduce this universal scheme from April 2015. It will provide much needed peace of mind to the 40,000 people who sell their homes each year to pay for care. As well as offering time to make decisions and choice over what happens to their home—a point well made by the noble Lord, Lord Lipsey—it will open up new options, such as renting it out
In his amendments, the noble Lord raises important questions about implementation. These concern the interest rate, the use of a deferred payment to purchase insurance, support for authorities to implement deferred payments and the timetable. Before turning directly to those amendments, it may be helpful if I briefly outline our plans.
Clauses 34 and 35 contain the necessary powers for us to introduce deferred payments. All authorities will offer deferred payments and it is our intention that people at risk of selling their home to pay for residential care will qualify. They will be able to defer reasonable residential care and accommodation fees, in the care home of their choice, for the whole of their lifetime. We are currently consulting on more detailed proposals on who will qualify and what fees they can defer, and are gathering more evidence on the costs and practical issues involved with offering deferred payments.
One practical issue that we are exploring in our consultation is the possibility of situations in which the authority cannot secure its debt through a legal charge on the property. This is why the Bill provides for other forms of security, including third-party guarantees. The noble Lord, Lord Lipsey, expressed doubts about this provision and wondered whether the proposals in the Bill may put people off taking out a deferred payment plan. Our guiding principle here is that we want as many people as possible to benefit from deferred payments, but it is equally important that local authorities are able to secure their debt.
Traditionally, deferred payments have been secured by registering with the Land Registry a legal charge on the person’s land, but this might not always be possible or offer sufficient security to allow the authority to recover its costs. Examples of this might include when a charge cannot be secured by registration with the Land Registry or where there is reasonable doubt about the person’s ability to afford the care home of their choice over the longer term, but we are consulting on whether there are situations in which offering a deferred payment is particularly challenging and, if so, on what a constructive way forward might be. That might include use of a different form of guarantee such as a solicitor’s agreement or the involvement of a third party. It is important that the Bill contains this flexibility so that when we design deferred payments to accommodate all situations that might arise, individuals’ preferences about the type of security that they wish to offer can be built in. I hope that this will persuade the noble Lord to withdraw his amendment, at least for the time being.
These issues will, in turn, inform how we set the interest rate, which has to strike an important balance. The rate must be enough to help authorities cover their lending costs but be affordable to people going into residential care who are at risk of selling their home. I understand the intention of Amendment 92ZZW to fix the interest rate at a predictable level but, as the noble Lord, Lord Lipsey, might have sensed—the noble Lord, Lord Warner, may have alerted him to this—I am concerned that setting the rate in the Bill before we have finalised other aspects of the scheme is premature. We will announce the proposed interest rate following the consultation and decisions on the wider design of the scheme. This will be set out in the regulations that we will consult upon in 2014. It will be a nationally set, maximum interest rate and local authorities will not therefore be able to charge excessive rates.
I have tabled government Amendment 92ZZAA, which would introduce a new clause allowing authorities to make alternative arrangements for people who would not wish to have a deferred payment because of their religious objection to paying interest. I am grateful to the Islamic Bank of Britain for its help on this amendment. We will work with the bank over the summer to produce detailed proposals, and ensure deferred payments are available to such people.
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Government Amendment 105U would provide that regulations made under the new clause, relating to how authorities secure their debt, would be subject to the affirmative resolution procedure if they amend or repeal an Act of Parliament. This mirrors the existing requirement in respect of similar regulations made under Clause 35(9), dealing with deferred payments.
The noble Lord, Lord Lipsey, has tabled Amendment 92ZZY, under which authorities would offer loans to people to assist with purchasing care annuities, so that they may enjoy peace of mind from insurance while also protecting their home. Of course, I understand the motivation for this amendment but, having reflected on this, our view is that the insurance market already
offers such a mechanism: the use of equity release to purchase a care annuity. We are not convinced that the noble Lord’s amendment is necessary.
The noble Lord, Lord Hunt, asked whether the insurance market is really prepared to develop products of this kind. We are as sure as we can be that it will do so. Many companies have expressly said that they support the changes we are making. As I may have mentioned in an earlier debate, the Association of British Insurers welcomed our announcement, commenting that:
“This is potentially another positive step forward in tackling the challenges of an ageing society”.
We have a sector-led review working constructively with the Government to understand how the market will develop, or should develop, and in general create the right environment for products to succeed. That work will proceed over the summer.