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Will Dilnot’s reforms work?

Benedict Brogan and other journalists have been briefed that the government will push Dilnot off into the “medium length grass”. What’s Number 10′s concern?

Whoever briefed Ben Brogan that the cost of the Dilnot package would rise to £5 billion within 10 years was clearly exaggerating: the first year cost is £1.7 billion, rising to £3.6 billion after 15 years (in 2010/11 prices). Fully implemented, the package costs 0.22 per cent of GDP – hardly wildly unaffordable. So the key question is whether the government is prepared to pre-commit £1.7 billion, rising to £2.2 billion, from the next Spending Review. That reduces its scope for tax cuts or spending increases elsewhere, and it is largely a subsidy from the general taxpayer to the elderly, but it is surely a price worth paying for achieving a solution to the social care funding crisis.

The cost won’t disappear if the government doesn’t act: it will be simply be borne by families themselves, either in cuts to services, paying out of their own income and assets, or by leaving employment to care for relatives.

Number 10 is also reportedly concerned about Tory voters receiving disproportional benefit from the Dilnot reforms. This is the key distributional table from the report:

Dilnot report, Figure 11: Public expenditure in 2010/11 on older people’s services by income quintile

The table shows that the top quintile benefits the most from the reforms, as one might expect from the introduction of a fee cap. But all groups gain some benefit, including the squeezed middle, whom John Healey prioritised in his recent speech at IPPR (watch / read).

Dilnot has clearly decided that the level of the cap and the means test will be the key determinants of whether his package secures consensus, and that a future government could choose to vary the levels at which these are set rather than tear up the reforms and start again.

In this he is probably right. But Labour frontbenchers will have another concern, which is whether Dilnot’s reforms really will lead to a care insurance or equity release market for fees below the cap in which almost everybody is enrolled. Before the election, Labour favoured a comprehensive social care funding system because it meant that everybody would benefit but also that almost everybody would pay, through a charge that could be collected at retirement age or death. Dilnot’s reforms give no guarantee that everybody will save or self-insure for costs not met by the state, and for those with assets below £100,000 there will be no incentive to do so, unless an individual wants better care than state-funded services might provide.

Dilnot has some useful ideas for expanding insurance and equity release markets, such as the extension of disability-linked annuities and other tax-favoured investment vehicles, like ISAs. But there is a great risk here that myopia about care needs, a continued belief that the state will pick up the tab, or just plain bad luck will leave people without coverage below the new cap. Dilnot is staking a lot on a system that has no compulsory element to it.

One useful idea in the report is that local authority deferred payment schemes should be universalised, so that wherever you live, the option of settling your fees with the local council out of your estate becomes available. On this score, the government should look to New Zealand, where local authorities have first call on an estate’s assets, ahead of mortgages and anything else. That means that the system is incredibly safe, leading to lower interest charges. In fact, this could also point the way to new forms of local, cooperative insurance for care charges, in which local government or new mutual providers take the lead. If any area of public service is crying out for locally responsive, family-centred mutualism, social care is it.

Dilnot was asked to report on the funding of social care, not its delivery, but he also has some useful things to say about integrating health and social care, pooling budgets and so on. This is where the biggest efficiencies and cost savings will be found.

The report doesn’t get into reform of the sector, however, which is where the debate must also now focus: why do we still have lots of care homes and limited “care-plus” private housing for the elderly? Why is home-care technology still so limited in its use? Why is the care workforce still badly paid and low(ish)-skilled, with a high turnover rate, when people want skilled carers whom they know and trust? As IPPR’s recent report on London’s care sector showed, this is a sector that needs reform as much as investment.

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2 Responses to Will Dilnot’s reforms work?

  1. Nick

    Good to see your profiling of the New Zealand local authority initiative.I will be interested to follow developments on this in England.

    Best wishes

    Peter

  2. Graham Facks-Martin says:

    I largely agree with your blog.The solution advocated by Dilnot is completely wrong because the people who will benefit most are the wealthiest and it will significantly increase public expenditure. The problem with the cost of care is that broadly the poorer members of society either cannot or have great difficulty in paying for care whilst the wealthier can afford it.The solution however devised is to ensure that the wealthier help to pay the cost of care for the poorer members of society. As you indicate the last Labour Government suggested inter alia that there should be a compulsory insurance scheme. Unless it is compulsory it will not work. I am not wealthy but I have enough savings to meet any anticipated cost of care but I might die first anyway.I would not subscribe to a voluntary scheme and neither would most of the population who are wealthier that I am so it would have to be compulsory. I am a wicked Tory but a sensible one !