THOUSANDS of elderly and disabled people could benefit from reforms to the way long-term care is funded.

Alistair Darling announced that an additional £2.6 billion would be given to local authority funding by 2010-11. He also said the governemnt would produce a green paper which will address the growing problem of how social care is paid for.

Social care covers services such as help with washing and dressing, as well as meals on wheels provided by local authorities and independent organisations to the elderly and disabled either in their own homes or in day centres.

This type of care is currently means-tested - anyone with assets of more than £21,000 has to pay for any help they receive.

But with people living longer, the burden of funding care costs can be financially crippling for families.

The government will look at a number ways to reform the system, including making personal care free, increasing funding options such as insurance policies and releasing equity from the person’s home.

It is believed that the favoured option is a “partnership” model that was suggested by the former banker, Sir Derek Wanless, who published a report on long-term care funding last year.

This would involve a certain level of core care services being provided free, while individuals could opt for additional services for which they would pay part of the cost.

The government would match each pound up to a set limit. Housing costs would remain means-tested.

Alan Johnson, health secretary, said: “The increase in funding for social care, combined with a new Green Paper on the care system recognises the changing nature of our society and the increasing number of carers.”