tisdag 13 maj 2008

Old people's care problems

Ideally, one carries on as normal until one's very last day, then wakes up one morning feeling a bit dozy, manages to say goodbye to everyone and breathes one's last in the afternoon.

For most of us, it does not work like that. Typically, one is liable to spend two years in some kind of care home. That means at any one time, around 2.5% of people are in care - about 1.5 million at any one time if the population is taken at 60 million. With care costs of around £40,000 a year, that works out at an annual cost of £60 billion. Bearing in mind that over one-third of this is tax, if all the cost was to be paid by the government the net annual cost would be just under £40 billion, which is just under 10% of annual government expenditure.

If payment for care is means-tested, people have an incentive to spend their last penny. But within the lifetime of those who have just retired, inflation has reduced the value of money by a factor of 30 since they began work. Inflation is in effect the taxation of savings, and governments cannot expect people to save unless they are firmly committed to maintaining the purchasing power of money, which they clearly have not been. This is only to be expected as inflation enables governments to borrow money and pay back in depreciated currency, which is the easy way out when people expect more of the government than they are willing to pay for through their taxes.

Underlying this is the fact that tax systems worldwide are not fit for purpose, but until that situation is acknowledged and dealt with, paying for the care of people who are too frail to look after themselves will be a chronic problem.

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