Business as usual

No-one can be surprised at the election result. The polls had indicated that the only question to be answered was the size of the majority. Labour now has a clear mandate from the electorate to get on with their manifesto proposals, which did, in fact, largely reflect the plans already being implemented during the last parliament.

Health, education and transport are areas that the public clearly feels need to be addressed as a matter of urgency. But the elderly received more than their usual share of attention from all parties in this election. We have yet to learn the age breakdown of voters but it was anticipated that older people were more likely to turn up at the polling stations, which might explain this additional attention.

Is Labour likely to change its plans for the elderly in view of the strength of the attack by the other parties and, in particular, will this have any effect on the market for long term care insurance (LTCI)?

The answer is probably no. Nothing we have seen so far suggests that Labour will change its plans. There is no change at the top and Alan Milburn keeps his cabinet post as Secretary of State for health.

In the yellow corner

The Liberal Democrats were most vocal in their view that Labour should do more for elderly people in need of care. They wanted the Government to follow the Scottish decision to offer free personal care as well as free nursing care to all elderly people in nursing homes. The Scottish executive may have stated that this is a desired objective, but they have not yet fully explored whether this is possible, or where the money will come from. It is unlikely that a decision will be made in Scotland until later this year.

The Liberal Democrats backed their proposal with research suggesting 70,000 homes were at risk from a forced sale to cover care costs. Previous research had revealed a figure of 40,000 homes. This may highlight the need for LTCI and act as a useful sales statistic when talking to clients about long term care insurance. However, it did not sway the Government's response.

It has been said that long term care (LTC) for the elderly is a head versus the heart issue. The heart says 'let us pay all long term care costs for the elderly' but the head says 'there are not enough financial resources to do this'. This is an excellent way of describing the problem which faced the last Conservative government and the one Labour wrestled with during the last parliament. Both Conservative and Labour governments came to the same conclusion ' the State cannot afford to pay for personal care costs in addition to nursing care costs. Those people who have no means to pay for care receive it free and Labour argues that this is the case for seven out of 10 elderly people.

With a rising elderly population it is not feasible to contemplate an open-ended cost commitment, and at the end of the day the head, in the form of the Treasury, rules the heart. The Liberal Democrats are in a strong position to advocate free care as they are not in power and do not have to make the numbers add up.

As can be seen from the chart, the number of people over the age of 65 is growing, in particular those aged over 85. The cost of pensions, healthcare and social services support for the elderly is climbing, just as the proportion of people ' the taxpayers ' starts to fall.

Achievements so far

To put the future into context, let us just reprise what ground Labour covered in its first term on funding care for the elderly.

When Labour came to power in 1997, they followed a Conservative government which had a bill going through parliament proposing a partnership scheme between the State and older people to fund care. Those prepared to invest in LTCI protection would have the sum insured more than matched by the Government, thus ensuring that their assets were protected. (The Conservative's election proposals for the elderly this time round included a variation on this theme).

The new Labour Government did not favour the Conservative's proposal and wanted to review the structure of funding long term care. With this in mind they set up the Royal Commission under Sir Stewart Sutherland to do just that.

The Royal Commission spent a year consulting with a wide range of interested parties, from both the private and public sectors, before making its recommendations.

The Government was unhappy about some areas of the Commission's proposals and, to complicate the issue, a separate report from dissenting commissioners was published which disagreed with the main findings of the commission on the key question of who should pay for personal care.

The Government took some time to reach its own conclusions, but with hindsight it is clear to see that their proposals on funding care formed part of a much broader analysis on the future of NHS spending, which itself was part of a Comprehensive Spending Review.

The NHS Plan, which came out last summer, included proposals that the State would pay for nursing care in nursing homes up to a value of £5,000 a year, and that personal care and accommodation should be paid for by those individuals who it was felt could afford it. On average, people are likely to have around £2,500 of costs paid for out of an average nursing home bill of £19,000 a year. The means test, which judges a person's ability to pay for long term care, has since gone up marginally from £16,000 to £18,500.

A big investment

With other proposed expenditure on elderly healthcare, the Government considered that it had more than matched the investment recommended by the Commission with a total of £1.4bn going into health and social services for older people.

The Government also proposed to spend £500m on providing financial support for carers, with a further £255m to be allocated to social services towards care provision over the next three years.

Looking at Labour's track record may give us an indication of their plans for the future. The Health and Social Care Bill, which included the free nursing care clause, was squeezed through parliament just before the election. The Government has a clear view about what it wants to achieve, and with the mandate to carry on its work, there is no reason for it to change the proposals set out in the NHS Plan.

The NHS Plan identified the role that long term care insurance can play, and full regulation will be with us within a year. No-one is, or should be, sitting on the fence any more.