Elderly people moving into residential and nursing homes will have a breathing space before they have to use their housing capital to pay for residential care, the government has announced.

The value of the home will be disregarded for up to three months from admission to care from April 2001.

The government also announced that from October 2001 it would cover the costs of care provided by a registered nurse to people in residential and nursing homes. Nurses’ time spent supervising or delegating care will be paid for by the NHS, but not care provided by anyone who is not a registered nurse.

The costs of accommodation and personal care – everything other than the costs of a registered nurse’s time – will still be means tested.

The government’s response to the Royal Commission estimates that this change will benefit about 35,000 people at any one time, and "could save up to" £5000 on a year’s stay in a nursing home.

The government also announced the residential allowance will be scrapped from April 2002, and the resources will be transferred to local authorities.

The allowance has been criticised for providing an incentive to local authorities to place older people in private residential homes.

People who have been in residential care since before the Community Care reforms were introduced in 1993 – those on so called "preserved rights" who depend on social security to fund their care – will from April 2002 be subject to the same local authority care management regime as people who entered residential care since 1993.

There will also be a new grant to local authorities to enable them to loan money to older people going into nursing or residential care so they are not forced to sell their homes during their lifetime. The loan would be recoverable when the property was sold after the person’s death.