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I once tried to convince a life insurance salesman who called at my door that I’d take out a policy if they paid me out immediately on the promise that I’d commit suicide by the end of the year. My admittedly facetious argument was that I might as well enjoy the money while I was alive than give it to someone else when I was dead.
He didn’t go for the idea and who could blame him? It wasn’t of course meant seriously, and was really just a way to get rid of an annoying intrusion into my Sunday afternoon. I must admit I don’t really like insurance salesmen and he seemed like fair game.
I’m not that fond of Conservative politicians either, and as our supreme leader unveiled her manifesto this week, it seems the she might now have a fair bit in common with that salesman. Rumours circulating on the internet at the moment suggest that, not content with finagling our social contract in favour of private companies in virtually every walk of life, Theresa May is now entering into the equity release market.
You must have seen those cheesy adverts, where lantern jawed, grey-haired suntanned ex-bank managers saunter about with their equally unbelievable trophy wives, taking world cruises, building conservatories and polishing the new set of golf clubs, all bought from the proceeds of a completely not-dodgy-at-all financial instrument called equity release. Under these schemes you effectively sell a portion of your home with the idea that after your death the investment company will sell it and recoup the cost of the fabulous lifestyle you’ve been enjoying. Well Theresa May has other ideas for that money.
Her plan is that if you’re unlucky enough to get sick or infirm in your dotage, you just sign up to her once in a deathtime offer and she’ll cover all those social care costs that you thought you’d already paid for all your working life. Call this number now and she’ll throw in this marvellous clock radio and a genuine imitation plastic gold fountain pen!
I’m not sure at what point we all seemed to blithely accept that social care should be partly or wholly funded from our own savings or investments, rather than by the state, but it seems to have happened. The Tory manifesto pledge to force us all to wipe out everything we own, down to an arbitrary level, initially to be set at £100,000, to fund our care in later life has unintentionally highlighted this fact to many people who may not have been fully aware of it.
The claim from Jeremy Hunt is that this simply levels the playing field between those who receive care in their homes and those who go into residential care. There’s some twisted logic in that. But instead of raising the whole game, he’s moved the goalposts to make everybody worse off.
Presumably the reason those going into care homes agreed to fund this from the sale of their own house was because this seemed like a fairly straight swap. Perhaps not a fair one, but the principle was established. This still left those who had care provided at home with a bill for all or some of their care under means testing, but in their case their homes were not included in the equation.
If the Tories win next month this is no longer going to be the case. You will be expected to cover these costs from the equity in the property you live in. This is where Mrs May provides a gift for those shiny suited salesmen. They’ll offer you a cosy little equity release deal that will give someone – no doubt a private care provider with a property investment arm – a charge over your house to cover any costs you incur while you’re still alive. Sounds great right? But as with most of these clever schemes, there’s a catch.
For someone living alone, with no dependents, children or anyone to leave a legacy to, it may seem like a great idea. For anyone who thought they might like to leave something to their children or grandchildren to maybe get their own foot on the housing ladder, go to university, start a business or fund some training it’s not so great. True they can exclude £100,000 from their assets to pass on, but that’s not going to buy you much in today’s property market. And that’s assuming it’s not shared with multiple offspring.
There have been some arguments that this proposal represents a kind of wealth tax or redistribution of unearned income and there’s some merit in that. But we’re generally talking about modest estates here. A few hundred thousand maybe of investment appreciation that just happened to attach itself to your home. Inheritances are taxed anyway above a certain level, and in general they are the only foreseeable way that many younger people will ever finance buying their own home. And if those people are currently living with relatives in receipt of care, they also face losing their homes as soon as the person being cared for dies.
Theresa May is trying to sell this policy as the solution to years of plundering of social care budgets that her government has undertaken, calling it a “long term fair solution that works across generations”. But of course it’s anything but that. What it really represents is a short term cash grab to claw back some of the small portion of wealth that has accrued for many ordinary people who she probably thinks don’t deserve it. Interestingly, it also represents the theft of the Tory dream from many of them, giving lie to the Conservative ideology that the market will enrich us all while socialism is only for poor people.
Naturally the really rich won’t be touched by this, and the really poor will still need to fight for every scrap of help from a demotivated and underfunded welfare state. Even those with modest savings and investments will eventually be reduced to the same level as those at the bottom of the pile. The longer you live, the more impoverished your care will become. That Tory dream just became a nightmare.
There’s no long term view to this. This quick injection of cash might stave off the looming social care crisis for what’s left of one older generation. But the next, the renter generation, living off the gig economy with little or no savings, no pension, no property and now not even some portion of handed down wealth, will still be left high and dry.
And while snake oil saleswoman May convinces herself and maybe enough doe-eyed voters, that she’s found the key to the problem, the time bomb of social care will just keep ticking. Not only that, there will no longer be an incentive to save for, or own a house. I’ve already heard friends say that they may as well sell up now, help their children to buy somewhere to live, and spend the rest of the money while they can.
The only way to really avoid the coming explosion is to re-energise the principles of the welfare state where we all pay into a pot in the hope that we won’t need to dip into it. It’s a pooled risk that we all share and in doing so assure the future health of ourselves and our fellow citizens. It’s not called social care for nothing. This is an admission that socialism works for everyone. The alternative we now see is a free market that simply defers the day when you’ll individually have to pay a lot more for the same service when you need it.
Moreover, if we continue to accept the principal that any of us should be left with the bill for social care, it sets a precedent that puts us on the slippery slope towards co-payment for health care in general. If people with cash in the bank or a valuable asset can be forced to pay for care that was once provided by the state, how long before that argument is made for hip operations, cataract surgery or cancer care? Once this genie is out of the bottle, it’s going to be extremely tricky to get back in.
In recent years many care providers have been backing away from council contracts claiming that there isn’t enough money available to make them profitable. May’s new wheeze may reverse that trend for the time being, especially if she legislates to give these companies the power to carry a charge on assets and seize them on the death of the owners.
Those rumours I mentioned earlier surround a quote from a supposed city insider claiming that this has been part of the plan for some time. That the government has already secretly tendered out the contracts to provide these plans to desperate home owners in need of care. Also that insurance backed schemes may be available to offset the risk in later life, something that will inevitably become more expensive as we age.
Insurance companies and equity providers will do extremely well out of this, which can’t have escaped Mrs May’s notice. A commercial banking bonanza is already being predicted, especially if interest and administration fees are included in what are essentially long term loans.
They can call this whatever they like but in essence it’s health insurance, and it’s cover we’re all probably going to have to buy. It’s not going to be a very big intellectual leap to get from that to a full-blown private health service. All that’s required to put us on this slippery slope is legislation compelling people to buy the salesman’s magic beans and it’s going to be money for old rope, or more to the point, old people.
These proposals highlight the silent treachery that already sits at the heart of our social care system. Moreover it’s a betrayal of every one of those people that bought into the Tory dream of home ownership at the heart of Thatcher’s supposed utopia.
Yesterday Theresa May claimed that there was no such thing as ‘Mayism’ but I’d beg to differ. Thatcher may have kicked off an era of neoliberalism, and with it the privatisation of many publicly owned assets, but even she wasn’t desperate enough to auction off an entire generation simply to close her well manicured fingers around our throats for another five long years.