Care costs 'badly underestimated'

A major Government scheme designed to prevent 40,000 pensioners a year having to sell their home to pay for care has badly underestimated the costs, local councils have warned.

Under the planned scheme - a central plank of the Coalition's care system overhaul - pensioners would be able to borrow the costs of their care from the local council and the money would later be recouped from their estate after their death.

However, a new report from the Local Government Association (LGA) suggests it could cost up to 5 times more than official estimates.

After looking at councils' own planning estimates, the LGA - which represents almost 400 councils in England and Wales - has predicted that local authorities will collectively need to put aside £1.1 billion to operate the scheme within 10 years.

According to the LGA's calculations, assumptions in the Government's own impact assessment about how much people will have to borrow and for how long suggest the scheme would cost only £230 million a year.

Department of Health does not 'recognise the estimate'

However, the Department of Health said it did not recognise the estimate cited by the LGA and stated that the scheme is designed to be cost neutral within a few years.

And it said it has set aside £110 million to help councils with the start-up costs.

The latest disagreement comes after ministers were last year accused of betraying older people when it became clear that people with savings and other assets above a set bar would not qualify for the 'universal' scheme.

LGA chairman Sir Merrick Cockell, a former Conservative leader of Kensington and Chelsea council in west London, said there is a risk councils could be bankrupted by the scheme if take-up is too high.

The Government has 'massively underestimated' the costs of the deferred payment scheme, he warned.

'With costs likely to exceed £1.1 billion, councils are at real risk of incurring costs that they simply can't meet.

'We urge the Government to consider setting up a separate national organisation, similar to the Student Loans Company, to run the deferred payment scheme on behalf of councils.'

The proposed scheme was launched as part of the Government's changes to the care system based on recommendations of a landmark commission chaired by the economist Sir Andrew Dilnot.

Copyright Press Association 2014