Reform of Social Care Funding in Britain
Fair Care? An Inter- (and intra-) Generational Solution to the Care Funding Crisis
Care Initiative Seminar: Conversations on Care
Green Templeton College, 15 November 2018
Speaker: Laura Gardiner, Research Director, Resolution Foundation.
Discussant: Dame Kate Barker, Chair, King’s Fund Commission on the Future of Health and Social Care in England
Chair: Professor Mary Daly, Governing Body Fellow, Green Templeton College; Professor of Sociology and Social Policy, University of Oxford
Laura Gardiner explained the remit of the Intergenerational Commission, a two-year investigation into the living standards of different generations. The Commission focused on the ‘generational contract’ – which includes the aspirations for society to simultaneously provide for older people whilst making continual progress on living standards of younger generations.
The challenge is how to achieve these two aspirations in a fair way. Social care was not the sole focus of the Commission’s work, but is of concern because of the particular threat to the generational contract implied by the crisis in social care.
Laura outlined three important features of the context for the recommendations produced by the Commission.
- Rising demand for care is set against the living standards challenges faced by younger generations
An important part of the backdrop here is the under-resourcing of social care in England. Cuts in local authority budgets have reduced expenditure in real terms (spending per adult in England reduced by 13.5% between 2009/10 AND 2016/17). This has resulted in 1.2 million adults (over 65s) saying that they did not get the care they needed in 2016 (double the numbers of people who said this in 2010). Resources for social care are therefore falling at the same time as need is rising.
It was explained that this is not simply due to an ageing population as people live longer, but an increase in the ratio of older people and children to working people (known as the dependency ratio). The particular shape of the population (which gives us ‘lumpy cohorts’ on population graphs) causes additional policy challenges, as for example happens when the so-called baby boomers (people born between 1946-1965) start to retire in large numbers. In the UK’s ‘pay as you go’ welfare state, uneven cohorts present some really big challenges, as the current working population is taxed to pay for the current ‘dependent’ population. Some generations do better out of the welfare state than others.
Public spending is set to rise, driven not only by these demographic changes but due to rising health care costs. Cutting services would undermine the intergenerational contract. Increasing borrowing could help in the short term, but in the longer term would just push UP the future national debt. Increasing usual taxes would involve asking the current working generations (including the millennials – those born between 1981 and 2000 – and generation x – born between 1966 and 1980) to contribute more. Yet these are the groups which are bearing the brunt of today’s living standard challenges – they are the first generation to show no progress in living standards as compared with their predecessors, their pay has stagnated, and millennials are half as likely to own their own home as baby boomers were at age 30. If we need more money for services – is it fair to put that burden on the younger generation?
2. Income stagnation and wealth boom
The second contextual factor Laura introduced was the story of income stagnation. Over the last decade, household incomes have flat lined, but household wealth has boomed, creating much greater inequality than income generation. Household wealth is unequally shared across cohorts (with the wealth boom benefiting older generations compared to younger ones) and unequally spread within cohorts. So although wealth is increasingly concentrated in older generations it is unevenly shared within them. While wealth has boomed, wealth-related taxes have stayed flat.
3. Social care funding policy gridlock
Laura outlined some key social policy events of the last decade, including the 2009 Green Paper (Shaping the Future of Care Together) produced by the Labour Government which outlined five funding options for social care, with a favoured option of a compulsory insurance system (a tax in other words). This would be a deferred payment, payable at death out of a person’s estate and therefore became known as the death tax. The 2010 White Paper produced by the Coalition Government (Caring for our Future: Reforming care and support) focused on care delivery, not funding. Election manifestos in 2010 had fudged the issues of funding reform. The Dilnot Commission on Funding of Care and Support reported in 2011, including in its recommendations a cap on lifetime care costs. Some of these recommendations (including a cap – although at a higher level than recommended by Dilnot – and changes to the means-test) were included in the Care Act 2014, with a plan that they would be implemented from 2016. The attempt by the Conservative Party general election manifesto in 2015 to tackle the issue of social care funding was dubbed a ‘dementia tax’ and quickly dropped. By 2016 the proposed cap and means-testing changes were delayed. During 2017 additional short-term funding inputs were being made by the Government for social care, and plans for a Green paper were announced. Further changes were proposed in the 2017 election manifesto, but the implementation of the cap and means-test reform were scrapped. The Green Paper remains delayed, with an announcement made in the week commencing 12 November that it would be published by Christmas.
Taking these key contextual factors into account, the Intergenerational Commission sought to find a solution to care funding that is fair both inter- and intra-generationally and cuts through the reform deadlock. They proposed:
- A focus on wealth that would shift the age profile of those who would contribute additional revenue, and draw additional resources from those better off within age groups;
- A balance between increased taxation and higher charges on service users.
The Commission preferred a full social insurance model but felt that this was not easily implementable, partly because of the policy gridlock described already but also because there is now so much unmet need because of under-funding this would require such significant cost.
The steps to do this include the following: firstly to generate more public funding through a progressive reform of property (council) tax. This allows another intergenerational issue of the housing market to be addressed, and would therefore meet other intergenerational goals. A regional specific tax would ensure that the lowest value properties in a region do not pay, with a progressive tax above an agreed level. This approach would mitigate against the regional disparities in the housing market, and would reverse the cuts that have been made to council tax support. A deferral system would need to be put in place for asset-rich, income-poor households. The tax would be levied on owners rather than renters, and second properties (and as Laura clarified during the Q&A session, non-domiciliary people) would be subject to higher tax rates. Such a progressive property tax would benefit younger people who are generally concentrated in lowest value properties with highest council tax. In addition, options such as a mansion tax could be considered.
Alongside this measure, the second step would be to introduce a new ‘NHS levy’ on private pension income (mirroring national insurance contributions). A third way of increasing private contributions would be to bring housing assets into means-tests, but with both an asset floor (minimum amount of assets allowed before contributions were levied) and a cost cap (similar to the Dilnot recommendations). This would offer greatest asset protection for those with the highest care costs.
Laura drew attention to some of the areas that the Commission did not address, for example they were unable to address the adequacy of deferred payment mechanisms. The ability of local authorities to bear the brunt of costs before deferred payments were made would determine the success of implementation of this policy. The adequacy of existing income-based means tests was not addressed, nor was the matter of ‘top-up’ payments that sit outside the costs cap. The cap would be based on what the local authority judges to be the right cost, and in practice people might choose more expensive care provision than the local authority would deem appropriate. The lack of ring-fenced funding for social care by local authorities was not addressed. The question of whether a different approach is needed for working age adults who use social care needs to be considered.
Laura identified other important issues including the poor workforce pay and conditions in the care sector. Although efforts to integrate health and social care are welcome, these will not address the funding dilemmas that are of inter-generational concern. Laura concluded her presentation with her case that although a full social insurance model is preferred, it is not feasible in the immediate term. Instead, the more modest steps set out by the Intergenerational Commission offer a way forward towards a break-through in social care funding. Such a breakthrough, that is inter and intra generationally fair, cannot be put off any longer.
Dame Kate Barker, member of the Intergenerational Commission, and Chair of the King’s Fund Commission on the Future of Health and Social Care in England in 2014, opened the discussion agreeing that social care is indeed in crisis. This is not just an economic crisis but, in relation to how older people are not cared for, a moral crisis. One striking observation is how media discussion of social care too often focuses around just two points – how much of their own money individuals or their families are asked to contribute – which Laura has just discussed in detail – and the so-called ‘bed-blocking’ aspect (or DTOCs) which adds to NHS costs.
Kate described her view of social care following her work on the 2014 Commission as being ‘unjust, over complex and in danger of collapse’. Since that time, the fragility of the system has only increased as demonstrated by the collapse of a number of care providers. Kate, also a member of the advisory group for the Green Paper, was initially optimistic, and pleased when Matt Hancock, on taking on the role of Secretary of State for Health and Social Care from Jeremy Hunt earlier this year, extended the remit of the Green Paper to all adult social care, not just people over 65 years of age. However, initial optimism has been tempered by the multiple delays, or policy ‘gridlock’.
Kate’s approach to the Green Paper is that it needs to be radical, not least because any Green Paper proposals will be moderated in the subsequent White Paper. Kate urged us to remember the many different proposals that have been considered and rejected since the founding of the Welfare State, referring to Nicholas Timmins’ Biography of the Welfare State – The Five Giants.
Kate reminded the audience of how the 2014 Commission had compared the ways in which dementia care and cancer care are funded. Four years later we still have no real reform, little appetite to tackle the disparity between health and social care, and are not sufficiently considering questions around whether to shift health costs back to patients. We expect the NHS to pay for really high health costs however wealthy we are. It is undoubtedly an insurance system in the way social care at present is not.
In addition, there is perhaps not much logic about the health-related items we do have to pay for – much dentistry and chiropody, optical care, often in reality physiotherapy. Shifting the balance so that more low cost health care falls on the patient (changes to prescription charges, or to paying for doctors’ appointments – with suitable exemptions) but more high cost social care is met by taxpayers collectively still seems a desirable outcome.
What else would make for a radical Green Paper? Kate proposes tackling unmet need, which results in poorer elderly people being looked after by families who are themselves poor, and the inequalities of wealthy councils spending twice as much on social care as poorer areas, as a result of the council tax precept. The scope of eligibility needs to be increased, to at least include the needs that were met in 2010. The system needs to be made simpler – although most people have had to deal with the social care system, still people do not know how to access social care. The financial ‘cliff-edge’ of continuing health care needs to be addressed, which is the source of much distress to families where someone fails to qualify after successful treatment.
Kate also raised the question of whether relationships between health and social care at the local level are focusing on the right things, noting that, even in areas where integration has moved forward, people are still spending time asking: Which budget will this come from? Are we asking local authorities to do the right things? Why do we ask them to deal with social care? Maybe we need to think differently, for example about a care authority, perhaps at a regional level?
The 2014 Commission had identified an £8 billion funding gap to extend entitlement for care (compared to a further £3.56 billion funding gap as identified by the Local Government Association to maintain existing standards of care, after councils have already bridged a £6 billion gap since 2010). The 2014 Commission had proposed means-testing of winter fuel allowances and higher national insurance contributions for younger people as examples of ways to fund this gap.
Kate’s analysis of the intra- and inter-generational issues highlights the greatest problem as being for those people with little time to build up entitlement to social care through an insurance system, younger generations could build up a small entitlement and the baby-boomers could contribute intra-generationally. Kate raised the question of compulsory contributions from children towards their parents’ care, as found in Germany. This could result in a better balance being struck between family carers and the state.
The workforce issues flagged by Laura were also noted by Kate in relation to integration, a very different workforce is potentially needed to support people at home through integrating health and social care. Difficult organisational boundaries and unwelcome tax changes aside, Kate asked us to think about what we want from the social care system, and not just to focus on how we will pay for it.
Kate concluded that full solutions require both difficult conversations about organisational boundaries and unwelcome tax changes. In addition, there has been a persistent failure on the part of opposition parties to support reform, even reforms they might have suggested themselves when in office.
The audience commented on the way in which we have (perhaps irrationally) divided health and social care funding. However not all audience members agreed with the options proposed by Laura, and the implications of Kate’s questions about whether we should rebalance health and social care funding.
One audience member distinguished between two different kinds of inequity, one being between those who have to fund social care and those who do not, and another between those who are wealthy and those who are not Bringing them together, as suggested in the steps to change offered by the Intergenerational Commission, could be considered potentially irrelevant.
The long-term implications were also raised, with the question of whether the proposed Resolution Foundation changes constitute a short-term fix or a reform for the longer term. In the latter regard, the question was raised about whether we would be better off with a completely different model. It was generally agreed that there is policy gridlock at present. However the causes of this may be different to those suggested. In the view of one audience member the political system is not fit for purpose.
The issue of housing was felt to be key by a number of people, with one member noting that a house is not an asset, rather it is somewhere to live. Housing needs to contribute to the solution, and not the problems, not least through (re)design and function.
Gemma Hughes, Green Templeton College, November 25th, 2018