The coalition government is to set up a commission to look at the future of social care funding.

The formal agreement between the Conservatives and the Liberal Democrats says the commission will consider a “range of ideas”, including both the Tories’ favoured voluntary insurance scheme and the partnership funding model proposed by Sir Derek Wanless.

The agreement promises to “break down the barriers between health and social care funding to incentivise preventative action”.

It says it will extend the provision of personal budgets and will use direct payments to carers.

Chief executive of The King’s Fund Professor Chris Ham said: “The establishment of a commission on long term care, with a clear instruction to report within a year, is a positive signal that social care reform will be among the coalition government’s priorities. We welcome the inclusion of the partnership model, which was recommended by a review set up by The King’s Fund in 2006, among the funding options it will consider.

“‘It is now more than a decade since the Royal Commission established by the last government reported. The challenge for the new commission is to set out a comprehensive blueprint for reform that commands support across the political spectrum. The government must then map out a clear timetable for implementation, including legislation in the 2011 Queen’s Speech. Politicians from all the parties talked before the election about the need for consensus on the way forward - whether or not this can be achieved will be a key test of whether all the parties are serious about this.

“The inclusion in the agreement of commitments to break down the barriers between health and social care and extend personal budgets signal welcome developments in policy.”