Care: Financial Services Industry

Lord Hunt of Kings Heath Excerpts

Wednesday 26th February 2014 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, I, too, thank my noble friend Lord Lipsey and the other noble Lords who have spoken in this highly informed debate. It takes us back to our debates on the Care Bill, which is still subject to deliberation in the other place.

My noble friend referred to the statement of intent and to the difficulties that the industry has encountered in producing policies, for the reasons that he set out. We have studied the statement of intent with care. I noted that the introduction refers to the following fact:

“In March 2013 the Department asked the major firms and trade associations in this field to undertake a review of how the market could develop. This reported back in July 2013 and is being published today”.

No one admires more than me the Department of Health but it does seem to have taken rather a long time for this to have been reported. I should have thought that it would have been more helpful to noble Lords if it had been reported when we were considering some aspects of the Care Bill.

The essential point of the review was that,

“there is currently a lack of demand for products and that new products might initially reach only a small market”.

Shock, horror in the Financial Times—but I do not think that my noble friend was surprised. As he said, he does not really hold out much hope that there will be a market in the future in the way that noble Lords have been talking about tonight: first, as he said, because of the difficulty of pricing products due to the uncertainties in the years ahead, and, secondly, because of the reluctance of most of us to buy those products even if the industry were certain of being able to put them on the market. I should be interested to know whether the noble Earl agrees with my noble friend’s analysis or whether he is more optimistic. If he is more optimistic, then why?

However, my noble friend pointed to what he described as two saleable products: first, point of use and, secondly, enhanced annuities. He felt that those were essential to underpin the Dilnot proposals. I do not want to go over old ground but I agree with my noble friend and other noble Lords that the real problem for us is that, while we obviously welcome the foundations laid in the Care Bill, the fact is that it does not really produce what we originally thought it would—a clear cap that people can understand. We have the £72,000 cap but, in reality, we know that it is much higher. There is the £12,000 per annum living cost and there is also the fact that the £72,000 cap is related to what the local authority will pay. We know that private funders pay more than that, and there are many suggestions that private funders are subsidising people funded by the local authority. Whether that will survive the transparency that will come in a few years’ time, I very much doubt. We argued and debated this when we discussed the Care Bill.

I know the nursing home that my noble friend referred to because my mother has instructed me that, if she has to go into a nursing home, that will be the one to which she goes. She sized it up and everyone in Oxford knows that it is a very good nursing home. However, £50,000 a year—£1,000 a week—is much higher than the local authority will be paying for the people for whom it will be responsible. Therefore, in essence, the cap will be much higher than £72,000. I agree with my noble friend that the Government need to come clean on this. We will not get the certainty that is required or achieve the required literacy among ourselves and other people unless it is clear what the likely liability is going to be for many of us and our relatives.

My noble friend raised two further points. The first concerned regulation. He is not convinced that the standards required of independent financial advisers are sufficient. This is worrying. Noble Lords will have received very interesting briefings for this debate from the Equity Release Council and the Just Retirement organisation. The Just Retirement briefing refers to polling that it commissioned, conducted by YouGov. It found that when individuals were asked where they would go for information or advice on how best to pay if they needed to organise professional care, one in five chose their local council, a similar number chose a CAB and almost a fifth said that they would go to the National Health Service—I am not sure whether that is advised, but there we go.

However, interestingly, the poll also revealed that when people were informed that they would face a large care bill before reaching the cap, almost two-thirds recognised the need for professional financial advice. That is encouraging as long as we can be sure that the independent professional advice is of a high order. I share my noble friend’s concerns that this is very variable, and I am not sure that the regulatory context in which those providing the advice operate will deliver the goods.

The second point that my noble friend raised comes back to being clear about what people are liable for. There are continuing concerns about the role of local authorities in this and their capacity to deliver. I am still concerned about their ability to undertake assessments when the new clock starts, and I have not been convinced that local authorities really do have the capacity to do the job effectively. However, that then raises the question of the nature of the very welcome campaign that the Government, as a result of our debates, have agreed to.

A national public awareness campaign is very important, but it has to be done with effectiveness and vigour. I wonder whether the noble Earl will be able to say a little more about how the campaign is going to be organised, what the budget will be, when it will be launched, how long it will run for and what partner organisations his department will work with. I refer him again to a poll by Just Retirement, which found that nearly one-third of those aged 55 and over believe that councils pay most of the cost, with individuals topping up the rest, while 40% believe that individuals pay most, with councils topping up the remainder. Many, many people do not understand the liabilities that they will face. We need to do everything that we can to ensure that people understand and can get proper advice, and we need to ensure that where the insurance market has a role to play, that role will be as effective as possible. This debate, although very short, is very important if we are to go forward with confidence in terms of Dilnot and the many liabilities that people are going to have to face in the future.