Mr Paul Burstow (Sutton & Cheam, Liberal Democrat)

I beg to move amendment No. 289, in page 46, line 21, at end insert

`and

(c) that person has been informed in writing of the advisability of appropriate independent financial advice by a suitably qualified advisor,'.

The amendment is simple. It would provide that, in setting up deferred payment arrangements and placing a charge on a property, which is a welcome development, a resident is made aware of and signposted towards independent financial advice to enable him to consider the pros and cons of such an arrangement before deciding to go down that path.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I sympathise with the hon. Gentleman's intentions, but it is difficult to understand what financial advice one would need when offered a zero interest loan.

Mr Paul Burstow (Sutton & Cheam, Liberal Democrat)

I am grateful for that comment, because it brings me to one of the matters that I wanted to raise. There is a time limit of 28 days after the period for which no payment is due. I hope that the Minister will respond to the concern that 28 days is not an adequate period in which a property might be disposed of and that interest will consequently kick in and accrue quickly. For that reason in particular, one could argue that aspects of the way in which the measure is being implemented warrant a financial adviser giving a person independent financial advice about the arrangements that pertain under the clause.

We want to clarify whether the Government have any intention of facilitating the provision of independent financial advice on such decisions at the relevant stage in a person's life. It will be helpful if the Minister describes what guidance will be issued to local authorities on how to assess the amount of a deferred payment when it falls due, because there are concerns about precisely what that will mean in practice. Again, a financial adviser might ensure that, when taking a decision about whether deferred payment is the right course of action, a person can take into account the guidance that I assume will be issued by the Department.

Who will pay for the legal charge? Will it be the local authority or the individual, by also attaching that cost to the property? Will it be paid for in another way? Those questions arise from the clause and it would be helpful if the Minister gave us some information about them.

Mr John Hutton (Minister of State, Department of Health; Barrow & Furness, Labour)

I understand why the hon. Gentleman tabled the amendment, which would require local authorities to inform people in writing of the advisability of taking independent financial advice. The Department of Health already intends to provide councils with guidance on the operation of the deferred payment scheme. It is envisaged that the guidance will include the advice to councils that people who want to enter into a deferred payment arrangement should be encouraged to seek independent financial advice.

Mr Paul Burstow (Sutton & Cheam, Liberal Democrat)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 316, in page 46, line 36, after `authority', insert

`or such person as the authority shall nominate'.

The amendment would write into the Bill the provision that the resident will grant to the authority or such person as the authority shall nominate a charge over the property. The purpose of this probing amendment is to find out from the Government how the arrangement will be financed. That is a sensible way of avoiding the trauma of selling a property during someone's lifetime, when it is evident that that lifetime will not be long. It may be better not to create that trauma and allow the property to be sold later, providing proper security for the local authority. However, such a charge on a property would not provide cash, and local authorities will be required to pay out hard cash to discharge their obligations.

Does the Minister propose that the Treasury should effectively underwrite the scheme so that local authorities are, in effect, in a neutral position? If that is not so, does he expect that local authorities might want to enter into arrangements with financial providers to take a charge on the property and advance money to the local authority against the accruing care home fees? Will the money come from the Treasury or from the local authority making arrangements with financial institutions? If it is the latter, would it not make sense to have a requirement in the Bill that the individual should, if required by the local authority, create a charge in favour of the institution that is funding the transaction?

My second question is about the revenue cost, given that there will be a zero interest charge. If the money is coming from the Treasury at zero interest, that question answers itself. If, however, it will come from a financial institution, how will the local authority recoup the cost of the transaction? Will that be made up to the local authority by the Minister's Department?

Mr John Hutton (Minister of State, Department of Health; Barrow & Furness, Labour)

The hon. Gentleman has asked a couple of questions about the operations of the deferred payment arrangements, and I will try to deal with his concerns. The effect of his amendment would be that when a resident entered into a deferred payment agreement with a local authority, the local authority would be able to nominate another person— perhaps a private debt collector or a commercial loans company—to enter into the legal charge on its behalf. That would certainly relieve the local authority from carrying the debt for the duration of the charge.

The purpose of the deferred payment scheme is to reassure people that they will not be forced into selling their homes during their lifetime to meet the cost of their care. There is a danger that the hon. Gentleman's amendment—he has moved it for fair reasons, and I do not criticise him—might add to the worries of older people and their families rather than reassuring them when they are considering a move into residential care. That could, conceivably, act as a deterrent to any vulnerable older person considering entering into a deferred payment arrangement.

In particular, people may fear that a private debt-collecting agency might be less than scrupulous in trying to recover the debt that results from the charge. I merely mention that, and do not want to make too great a play of it. The hon. Gentleman's amendment, far from reassuring older people, might undermine confidence in the scheme.

The hon. Gentleman asked a number of questions about how the scheme would be funded. We have tried to make it clear that we are providing a new ring-fenced grant to resource the scheme, with £15 million this year, £30 million next year and £40 million the year after for local authority resources. Local authorities will be able to use those resources for the up-front care costs associated with the person entering into care under the deferred payment arrangements. The scheme will be resourced through the ring-fenced grant, and the answer to the hon. Gentleman's question is that that will be resourced in the normal way, which he might describe as Treasury-financed.

The other point that I should bring to the hon. Gentleman's attention is that some councils already operate deferred payment arrangements, and do so from existing resources. There is nothing new in the idea, and we are just trying to extend access to these schemes in the way that we outlined in clause 54.

The zero rate of interest reflects the current position in relation to the loans, and we do not intend to change that. We want the schemes to be attractive and to reassure people that they will not be forced to sell their homes, and the zero rate of interest is reasonable for that purpose. The rate will ultimately be determined by local authority through the ring-fenced grant and financed in that way.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

On the subject of the ring-fenced grant that will finance this, will the Minister clarify whether, when the money is recovered by the local authority, the authorities will make a repayment that will create a re-circulating pool of money?

Mr John Hutton (Minister of State, Department of Health; Barrow & Furness, Labour)

Yes, that is how we see the scheme working. I should have made that clear, and apologise for not having done so.

The hon. Member for Sutton and Cheam asked about 28 days. That is the current situation, but we will have another look at that to see whether that is reasonable. I will come back to him on that point.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

It is slightly disingenuous of the Minister to suggest that responsible local authorities will be transacting with loan sharks and debt-collecting companies. I was thinking more of the Woolwich building society for example. The Minister's reassurances have rendered the amendment redundant, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 ordered to stand part of the Bill.