England’s care system for the elderly and frail has reached breaking point. After decades of make do and mend, the Government has finally grasped the social care nettle. But better care means more money. Britain can afford it – but is it a big enough priority? Nigel Burton reports.

BRITAIN is growing older. After the Second World War, when the state pension age was fixed at 65 for men, the average life expectancy was 66.

Pension pay-outs were affordable, even for a country on its knees after six years of war. But by 1960, the average life expectancy in the UK had risen to 71 and alarm bells were starting to ring.

According to a study for the Works and Pensions Department, more than 11 million people alive today will live long enough to celebrate their 100th birthday. Longevity rose more in the past 20 years than it had in the previous 70 – despite the obesity epidemic, heart disease and cancer.

Our remarkable longevity has created a financial timebomb in pensions, healthcare and social services, with taxpayers having to pick up the bill for an ageing population.

Last year, the Government set up The Commission on Funding of Care and Support, under economist Andrew Dilnot, to examine the problems.

Q: I’m getting on a bit. What does the report mean for me?

A: The Commission is calling for an overhaul to the current system so people don’t have to sell their home or exhaust their savings.

Under the current set-up, council-funded home help and care home places are only available to OAPs with assets of less than £23,250.

The rest either pay for care themselves – or go without. Dilnot says the payment threshold should rise to £100,000 – a fair reflection of the rise in property prices over the last two decades.

The Commission also recommends a cap on care contributions of £35,000, with the state picking up the bills for anything beyond that level.

Dilnot believes the cap and increased payment threshold should ensure no one will have to use more than a third of their assets paying for care.

Q: Sounds great if you’re about to retire, but how much will this cost?

A: If the Government goes ahead, it will need to find an extra £1.7bn a year – and this eyewatering figure could rise by as much as 50 per cent when the “baby boom” generation starts to retire. That means tax rises or cuts in spending elsewhere.

Q: Sounds like a lot of money. Can the country afford it in these recessionary times?

A: Dilnot points out that we are all four times richer in real terms than we were just after the Second World War. As for the cost to the Treasury, his proposals will require England to devote just 0.25 per cent of public spending towards helping the elderly.

Q: How about living costs?

A: The report recommends elderly people should still pay for their food and accommodation.

It believes an appropriate sum for this would be in the region of £7,000 to £10,000.

Q: Hmm... all this still sounds a bit costly to me, how can I plan for my old age?

A: Under the proposals, Dilnot hopes insurers will bring special policies to the market which will cover the cost of care in old age.

This will allow forward thinking types to protect themselves against the risk of very high care costs.

Insurance could spare a pensioner the agony of selling their home to pay for residential care fees. About 20,000 pensioners every year have to sell up to fund their care.

Q: What’s the chance of the insurance industry stepping up to the plate?

A: Pretty good if the Government limits their liabilities.

Until now, insurers have steered clear of social care because their liabilities are pretty much uncapped. A policy may pay out a few thousand or a few hundred thousand. The insurance industry doesn’t like the sound of that.

With a £35,000 cap, however, insurers would know the maximum amount they would have to pay out making them more amenable to providing comprehensive cover.

Other insurance schemes could help pay the extra fees for anyone who doesn’t fancy life in a local authority-run home and wants to live the high life in a more expensive venue.

Q: How much will these insurance policies cost?

A: No one knows for certain, but a one-off premium of £17,000 has been mentioned. Younger people will be able to spread the payments just like paying into a private pension.

Q: What happens if I can’t get insurance?

A: Then you’ll need to find the first £35,000 from savings or release cash from the value of your home.

Q: How likely is it to go ahead?

A: Health Secretary Andrew Lansley was careful to sound a note of caution last night. He welcomed calls for an overhaul of social care but warned that the Government needed to “consider carefully” the “significant costs’’ of reform.

“In the current public spending environment, we have to consider carefully the additional cost to the taxpayer of the commission’s proposals against other funding priorities.”

He said the Government would work with stakeholders in the autumn, using the Dilnot report as a ‘‘basis for engagement as a key part of a broader picture’’.

“This engagement will look at the fundamental questions for reform in social care, improving quality, developing and assuring the care market, integration with the NHS and wider services and personalisation,” he said.

The Government’s response will be published next spring, alongside a progress report on funding reform.

‘‘It remains our intention to legislate to this effect at the earliest opportunity,’’ Mr Lansley said.