'Perverse incentives' may force elderly people into residential homes prematurely, the Audit Commission has warned.

In a report on home care services published yesterday, it says that although elderly people living at home can be asked to contribute towards their care, moving them into residential homes leads to the sale of their houses, which then pays for the full cost of their care.

'Hard-pressed social services managers' with tight budgets 'face a 'perverse incentive' to encourage people to move into nursing or residential home care before they need to', Charging with Care says.

More than 500,000 people receive home care in England and Wales, of whom 420,000 are over 65. Services range from 'home help' activities to 'personal care' - which the Royal Commission on Long-Term Care has recommended should be available 'according to need and paid for from general taxation'.

The report says charges in different parts of the country vary 'from nothing to well over£100 a week for the same level of service', and 'the most disabled users often face the highest charges'.

Charging With Care: how councils charge for home care. Audit Commission Publications, 0800-502 030.£20.