dementia and your house
In 2008 there were 700,000 people with dementia in the UK. That number is rising rapidly and is projected to be over 1 million by 2025. One in three people over 65 will end their lives with a form of dementia.In 2008 there were 580,000 people with dementia needing Carers in England.
Not all Dementia Sufferers are home owners. For the age group most likely to suffer Dementia 71.6% (45-75+) of the population do own their own home. The average home is worth £215,847 at 2017 prices. So, of the one million people with dementia by 2025, 716,000 will be sitting on assets worth a total of £154Bn.
Imagine being able to take ownership of £154Bn of assets simply by waiting ten years. That is the Dementia Tax. By 2027 those who are currently suffering from even mild dementia symptoms will have to pay for care as the value of the Home will be taken into account when means testing financial support for social care.
Currently, Carers put £132Bn into the Economy purely through Caring Services. This is the amount of money after all benefits - not just Attendance Allowance or Carers Allowance - are paid out. Carers are, in general, the next generation for Dementia sufferers - the children and grandchildren. In total, the Dementia Tax will be taking £286Bn from people who already pay substantial amounts into the economy and have been doing so for two generations.
That means penalising people until 2050 and it does not even make financial sense.
A report from the London School of Economics and King’s College London commissioned by the Alzheimer’s Society estimated the financial cost of dementia at over £17 billion for the state and families in 2008. This cost grew significantly as the number of people with dementia rose. A King’s Fund study estimated that the cost of dementia in England would rise from £14.9 billion per year in 2007 to £24 billion (at 2007 prices) by 2026, making up 74% of mental health service costs. Using £154Bn of assets to pay for £24Bn of expenditure is not only poor economics it is an invitation to fraud on an industrial scale.
The less well understood outcome will be a house price collapse leaving first time buyers in negative equity for the first time since the 1980s. In efforts to reduce the amount paid for Care Services, it will become rational for Carers of Dementia Sufferers to undervalue the property to bring the total estate under £100,000 for the purposes of means testing. Undervaluation to receive benefits is, in Social Security Law, fraud. Which will result in a market in avoidance and evasion promoting corruption. The policy, itself, is about effective money laundering which is, always, corrupt.
This undervaluation of properties will, inevitably, signal to the markets that house prices are dropping and so provide pressure to further reduce house prices. This will leave existing first time buyers at risk of negative equity. When Dementia Sufferers within the Dementia Tax Regime begin to die, First Time Buyers will sell to escape negative equity. Resulting in an extreme boom and crash market that will last for decades. The initial boom will be hailed as an economic miracle until the initial crash reveals the depth of the problem. In 2007 the National Audit Office estimated that £102 million could be saved by reducing the time people Dementia Sufferers stay in hospital.
A Lincolnshire case study they found that people with dementia on orthopaedic wards were staying over 24 days on average compared to under 17 days for people without. That increased length of Hospital stay is increasingly expensive as Private Contractors provide the service. At the same time, the Private Contractors, driven by profit, have no incentive to move Dementia sufferers out of Hospitals. The overall outcome is that Hospitals will become bed blocked by Private Contractors and that will feed back to poorer Accident and Emergency Service, longer waiting times and increased ill health in the general population.
The Dementia Tax is a poorly thought out policy that has one objective: releasing £154Bn of assets into financial markets. With the net contribution of £29Bn to the UK economy from the Insurance Sector in 2015, the indication is that the £154Bn will be a five year soft landing for the Insurance Sector on exit from the EU. That soft landing will, inevitably, be a source of capital flight from the UK to other EU capitals such as Dublin, Paris and Berlin. Which leaves the policy cascading out from the Health and Social Care Sector to cascade destabilisation across the Economy.
There are 379 authorised Life Insurance Companies in the UK. 200 are UK authorised and 179 are headquartered in another European country and passport in under the EU Third Life Directive. With the unfolding of Exit from the European Union, the Dementia Tax creates a mechanism for capital flight from the UK via those 179 passported Life Insurance companies. If the UK wishes to retain a working financial services relationship after exit then those 47.2% of Life Insurance Companies passported into the UK market will become the potential source of almost £73Bn of capital flight.
It is a poorly thought out, uncosted, scheme that seeks to buy time for the Tories. Given the public availability of information that can be used to cost the scheme, and the pieces of past research that show how poor equity-release is for solving financial problems, where did the Dementia Tax actually come from?
Posted by jeffrey davies on 21 May 2017
