Social care green paper will help struggling low earners

NEWS RELEASE – For immediate use: TUESDAY 14 JULY 2009

SOCIAL CARE GREEN PAPER WILL HELP STRUGGLING LOW EARNERS

• 7.8 million low earners own their own home
• Low earners often fall over the threshold for means-tested support
• Low earners spend 97% of their monthly income, leaving very little left over for care costs
• Low earners are more likely to be care users

The Resolution Foundation today welcomes the Government’s Green Paper on the future adult care and support system which will help many struggling older low earners[1].

• 58% of low earners or 7.8 million own their own home[2]
• Low earners spend 97% of their monthly income, leaving very little left over for care costs. 27% of this goes on essential items such as housing, food and fuel compared to 16% among higher earners.

This means low earners often lose out in the current care and support system as they are too rich to qualify for state support, having over the threshold of £23,000 of equity in their house, and too poor to meet care costs out of their relatively low incomes. (Low earners are defined as households on £11,750-£27,150 per annum[3]). However, low earners are more likely than average to believe that the individual, other than the very poor, should be making a contribution to their care costs.

The Resolution Foundation, which works to improve outcomes for low earners, also found that[4]:

• Low earners are more likely to have experience of the care system:
  • They are twice as likely to be care users.
  • They are 25% more likely to be carers.
• Low earners, many of which are self-funders, say they find the system complex, inaccessible, and unfair.

The Government’s Green Paper, and the options it presents, could offer an end to the cliff-edge that low earners currently face by creating a more transparent and fairly funded system. The Foundation would however urge caution as to where the cut off point for contributing and means-testing falls, so that low earners are not overlooked or penalised.

The Foundation’s research has also shown that, whilst a lasting funding settlement is crucial, this goes hand-in-hand with a reformed system[5]. The Foundation was therefore also pleased to welcome:

• A new national minimum entitlement which will end the current unfairness and confusion experienced by low earners.
• A key role for local authorities to manage the market of care and support providers. As many low earners are self-funders this will help improve their access to the care they need.
• A commitment to provide everyone who needs care and support with a national assessment, information and advice, and personalised care and support. This will offer low earners the advice and support they need to make the most of their modest income and get the care they need.

Sue Regan, Chief Executive of the Resolution Foundation said:

“Low earners are squeezed in the current care system – excluded from help because of modest assets, yet unable to afford care costs. Today’s Green Paper is an important step towards creating a care system that is fair for low earners.”

/Ends

For further information[6][7] please contact Cara Brown on 020 7731 9143 / 07957 536758 or Mark Hanson on 07973 697 947

All the Foundation’s research, reports, briefings, seminar notes are available on our website www.resolutionfoundation.org

[1] At its broadest, we define the low earner group as including all those with below-median income (from all sources) who are not dependent on state support. For the purposes of analysis there are a number of different ways of capturing this group and this note uses a variety of methods, depending on the data available in the underlying sources.

• At its simplest, we consider the group to be made up of households in income deciles 3, 4 and 5: that is, with gross annual income between £11,650 and £27,150.
• Around 7.6 million households fall into this category in the UK, equivalent to around 13.4 million adults.
• We define two other income groups in relation to low earners: households with above-median incomes (income deciles 6-10) are considered high earners, while those with below £11,650 income (deciles 1 and 2) are considered benefit-dependent.
• This definition inevitably excludes some low earners (those in income deciles 1 & 2 who are not benefit-dependent and those living in high earner households who are individual low earners) and includes some benefit-dependent individuals. However, it provides a reasonable picture of the position faced by the majority of low earners.

[2] Compared to the UK average of 69%. The Resolution Foundation, Squeezed: the low earners audit.

[3] Ibid.

[4] The Resolution Foundation, Lost: low earners and the elderly care market

[5] The Resolution Foundation, Navigating the Way: the future care and well-being of older people

[6] The Foundation’s work on long-term care includes:

• ‘Lost: low earners and the elderly care market’, February 2008. An investigation into low earners’ experiences and perceptions of the care market, based on a combination of literature reviews and new polling, focus group and interview data.
• ‘A to Z: mapping long-term care markets’, May 2008. An analysis of the long term care system to produce an holistic “market map”, identifying weaknesses in the market which can be modelled to take into account future demographic and policy trends.
• A series of policy development projects using a range of quantitative and qualitative studies, stakeholder workshops and desk research investigating solutions to the weaknesses of the long term care market on Navigating care, Innovation and Efficiency in Long-Term Care, Local Market Shaping, and Funding.
• ‘Navigating the way: the future care and well-being of older people’, December 2008. A vision and architecture of a future care system, based on the findings from the four policy development projects (above).
• Current work includes work with ADASS on market shaping, the LGA on equity release and scoping work on information, advice and guidance.

[7] The Foundation’s first project in 2005 was on low earners and their financial health. Discovering an ‘advice gap’ for 12 million low earners of working age and a further 3 million low earners in retirement, the Foundation developed proposals for a national generic financial advice service. This proposed service was aimed at low earners in the ‘advice gap’ – people who are not currently attractive to commercial providers of advice, nor receiving support from existing voluntary sector provision. This work fed into the Thoresen Review which recommended in March this year that a Money Guidance service be set up. This is now at Pathfinder stage backed by £12 million from the Treasury and the FSA. Relevant Resolution Foundation reports can be downloaded from the Foundation’s website: www.resolutionfoundation.org A national dividend: The economic impact of financial advice and The advice gain: The impact of generic financial advice on the financial services industry.