From 2015, local councils will lend money to the elderly and will recoup the money from selling people's homes after they die.
Randeep Ramesh
The elderly and vulnerable will be allowed to borrow the cash to pay for residential care from councils before they go into a care home - but will have to pay it back when they die, the government will announce on Wednesday.
From 2015 the government will introduce a deferred payment scheme, part of a package of measures proposed by the Dilnot Commission a year ago. This will allow local authorities to agree to pay in advance for care if individuals cannot afford to do so without selling their home. Councils then recoup the cash when the house is sold.
A limited version of the scheme runs in England at present and about 8,500 people have borrowed about £200m. The health secretary Andrew Lansley, who will launch the government's white paper on social care, said the proposal will "end the scandal of older people being forced to sell their homes" to pay for care.
The measure is the only part of the Dilnot commission's report which will be enacted. The two key proposals - capping the total cost of care to £35,000 and extending support for the elderly with assets of £100,000, up from the current limit of £23,250 - will only be supported "in principle".
The Treasury blocked the proposals on the grounds of cost: the two would cost nearly £1.7bn. The deferred payment scheme is self-financing as people pay interest on the loan. Instead the vexed issue of social care funding will be considered at the next spending review - and new measures only undertaken after the next election.
At present 40,000 people sell their homes to pay for care each year. Lansley said: "It is hard enough for people to come to terms with needing to pay for extra help when their circumstances change - whether their health has suddenly deteriorated or age has started to take its toll. The last thing people want to think is having to immediately sell their home to pay for residential care."
Sources in the department of health denied the scheme was a "death tax", a reference to a Labour plan for a £20,000 levy deducted from the estates of older people when they die to pay for care. "It's not a tax because it's not mandatory. This is a voluntary scheme," said the source.
Although a quarter of people can expect to pay nothing for social care, half can expect care costs of up to £20,000 and one in 10 can expect costs topping £100,000.
Age UK says an ICM poll it conducted last week revealed that 89% of English adults believe that older and disabled people "shouldn't have to bear all the costs for support ? even if they have a small amount of savings".
The government will announce that the NHS will transfer an extra £300m to local councils to help "integrate" social care and health services. There is another £200m for housing projects to adapt houses for the elderly.
The white paper will also force councils to define more precisely eligibility criteria for social care and provide the elderly with information about services in the local area. There are 152 different adult social care systems - one for each local authority in England. The coalition, like Labour, has made it clear that entitlement to services differs too widely across the country leaving people complaining of a postcode lottery of care.
The government will claim there is enough money for councils to maintain their offer of social care. However the Local Government Association says the gap between the money available for providing services and the predicted cost of maintaining them is £1.4bn this year - stretching to £16.5bn by the end of the decade, when spending on social care will exceed 45% of council budgets.
With 1.5 million people aged 85 and over, social care is a tricky political issue for both parties. Last week cross-party talks broke down when it became clear that there was no new money to pay for the system.
Liz Kendall, Labour's shadow care minister, said: "The government's decision to kick long-term care funding into the long grass will be a bitter disappointment to hundreds of thousands of older and disabled people and their families. It will be a huge blow to local councils, who are desperate for a new settlement on funding social care. And it will be disastrous for the NHS, which will face intolerable pressure as crumbling care services are eroded further still and more older people end up in hospital when they don't need to."
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