The government has had a long time to get its social care reforms right. So it is curious, to say the least, that it has managed to produce a reform package that has been criticised from almost every quarter. Pensioner groups think that setting the cap on care costs at £75,000 is too high to benefit most of those needing care and prefer a comprehensive system instead, integrated with the NHS and paid for out of general taxation. Conversely, the Conservative Right hates the freeze on inheritance tax that will pay for 20% of the costs of the new system, and argues instead for a voluntary insurance market. A reform that was supposed to please readers of the Daily Mail will probably end up alienating them.
There are some worthwhile elements to the government’s plans, however. Lifting the means test for local authority funded support to £123,000 from £23,250 is a significant hike and will benefit older people with low to moderate levels of assets. The bottom quartile in the age range 75 to 84 has wealth (excluding pension wealth) of £55,200, falling to £29,000 for those over 85 (the median figures are £196,700 and £160,000 respectively). In the North of England average house prices are just short of £150,000, compared to over £460,000 in Greater London, so the new means test will benefit Northern pensioners to a greater degree than elsewhere. Andrew Dilnot also gave the government some comfort on the Today programme this morning by pointing out the £75,000 cap in 2017 would have been £61,000 in 2010/11 prices, and therefore only £11,000 higher in real terms than the top end of his committee’s proposed range of £50,000 at the time it published its report.
Other, less newsworthy, reforms in the package are also valuable. Ensuring that social care entitlements are set nationally, not locally, is a pre-requisite of enabling people to plan properly for their care needs, while giving everybody the option of rolling up their care charges against their assets until they die is a sensible and progressive way of drawing down on their estates without forcing them to sell their homes (if local authorities were given first call on a person’s estate to collect these charges, as in New Zealand, the new system would be even better).
But for all that, the reforms fall short, as Labour has pointed out. The cap doesn’t cover non-care costs, which will need to be met from pensions and other savings. It won’t affect most of those who enter residential care, since they die after two years on average without having accumulated £75,000 in charges. And it will be hard, if not impossible, for insurers to devise care products to cover the non-catastrophic costs that will still fall to families. Meanwhile, the current system of care for the elderly – premised on low paid, often migrant labour – will get worse as local authority budgets come under further strain.
Why has successful social care reform eluded successive governments? The first reason is that the Treasury is unwilling to take on the liability for a comprehensive taxpayer-funded model (outside of Scotland) and politicians are unwilling or unable to put the tax increases necessary to pay for better social care to the electorate. Each hedges the options of the other: the Treasury refuses to allocate significant resources to expanding social care entitlements while the political parties move crab-like around the territory of taxation options that might satisfy Treasury officials. This stalemate is not simply a function of the current fiscal climate, however. Labour tried – and failed – to make substantial headway with social care funding in the good times, as well as the bad.
Fiscal caution is certainly in order. In an ageing society, a system of managing the demand for, and the costs of, social care must be put in place. That is why Dilnot chose a partnership model in which both the state and individuals contribute to the financing of care provision. But this still leaves a substantial part of care expenditure outside the mechanisms of risk pooling, which means that collective efficiencies are not wholly realised. Meanwhile, individuals may still behave in myopic ways that lead them to under-invest in protection from care risks. These inefficiencies must be set against the demand-management and cost sharing benefits of the Dilnot scheme.
The second reason why social care reform has proved so piecemeal over many years is that care of the elderly and the disabled was kept out of the NHS when it was created in 1948, falling instead to local authorities under the National Assistance Act. This binary division between care and health has been deleterious to each, creating false professional, funding and service boundaries between the two. Andy Burnham’s recent speech – calling for integration of health and social care around the needs of individuals and their families, not institutions – was a powerful statement of the case for more fundamental reform than the government itself has envisaged.
It is fraught with political difficulty, however. Labour got seriously burned by the Tories’ “death tax” charge against its social care plans at the last election (an episode which is now replete with irony, given the use of Inheritance Tax to part fund the government’s proposed reforms). But a one-off capital charge or something similar (paid in retirement or at death) still looks like the best and fairest way of paying for the sort of comprehensive reforms that Burnham envisages.
More likely, perhaps, is that Labour finds a way to reduce the £75,000 cap in its Manifesto, as Dilnot clearly believed it would want to do (he designed the cap in part with an incoming Labour government in mind). This is a straight resource call to be weighed against other priorities. But if it could be accompanied by a substantive reform agenda – in which the divide between NHS and social care was steadily overcome; individuals were further empowered to shape their own care support and enabled to stay at home for longer, rather than enter care homes; and new mutual and other not-for-profit providers entered the care market – then Labour might gain significant electoral advantage from social care, rather than the reverse.
In an ageing society, care needs will continue to rise. Underlying demographic trends usually force their way into the political mainstream at some point, which is why social care is rising up the policy agenda. For social democrats, this provides an opportunity to shape collective, decent and potentially popular services to meet social needs. The opportunity should not be missed.