One of the great success stories of the modern world has been the sustained increases in life expectancy we have seen in recent decades, and which are projected to continue for the foreseeable future.
The fact we are living longer, healthier lives is something to be celebrated. It does, however, raise a number of tricky issues around our health and social care provision. In the UK, councils and NHS trusts are coming under increasing strain because of rising demand from the elderly. The whole system is creaking under the pressure.
At the moment, social care is mainly dealt with by local authorities. Anyone with wealth and savings worth more than around £23,000 has to pay for their care, and for those who can’t be cared for in their own home and need to go into residential care this includes the value of their house. Those unlucky enough to need care for many years, or who develop dementia — which can cost 40 per cent more than non-dementia care — can end up paying huge chunks out of the inheritance they always thought they would be leaving to their children.
I’ve seen this in my own family. When my grandmother had to go into a nursing home, the cost was nearly £600 per week. My mum had the appalling experience of having to spend her evenings sitting in a nursing home watching her own mother gradually forget who she was, after spending the afternoon sorting out the sale of her house to pay for the privilege.
Despite the fact people are paying these huge sums, there is still a growing funding gap in social care. The system is both underfunded and grossly unfair, yet fundamental reform has proved elusive, and political parties no doubt feel more wary of the topic than ever after the Conservatives got their fingers burnt in the 2017 General Election. A solution is needed that can command cross-party support and put the system on a sustainable footing for the long-term.
That is why the Centre for Policy Studies is launching a new report today, authored by Damian Green MP, who as First Secretary of State was responsible for work on the upcoming social care green paper. ‘Fixing the Care Crisis’ envisages a two-pillar approach to reform, using the pensions system as a model for social care.
First, the report proposes that the government should provide central funding for local authorities to deliver a basic level of care for all. Local authorities would conduct a needs assessment, as already occurs, and a set level of funding would then be made available depending on the individual’s care needs, akin to the tariff system in the NHS.
In other words, just as the state provides a pension for all, there would also be a basic level of care available for everyone. This removes the harsh means testing in the current system which results in some people have to pay for all their care while others can get everything paid for, which effectively punishes people for having savings and owning their own home.
This new “Universal Care Entitlement” would require additional funding. The numbers are notoriously uncertain in this policy area, because the system is so fragmented between different layers of government and between the public and private sectors, but we estimate perhaps £2.5 billion of additional funding would be needed initially.
There are a number of ways this could be funded, including making the Winter Fuel Allowance taxable and removing it from higher rate taxpayers, and potentially a 1 per cent National Insurance top-up for the over 50s if necessary. Our preferred option would be for funding to come from savings in other areas, and suggestions for such savings will be outlined in a CPS paper before the next spending review.
While the Universal Care Entitlement would provide for basic needs, we are not talking about an NHS-style system where the taxpayer would pay for all the bells and whistles. The second pillar of the paper is a new ‘Care Supplement’, similar to the successful auto-enrolment system we now have for private pension provision. This would be a non-compulsory scheme for people to insure themselves for their potential future care needs. People would be encouraged to pay for cover to top-up their Universal Care Entitlement, including options involving equity release.
Here there would be a pooling of risk — the essence of any system of insurance. Instead of the current lottery where the unlucky minority with significant care needs end up forking out huge sums for their care, a greater spread of the population would be contributing more modest sums, to give them the peace of mind that if they do end up needing care they are covered for whatever level of comfort they have chosen to pay for.
Of course, we shouldn’t underestimate the challenges involved in persuading people to take up the Care Supplement. Reform will require education and much greater societal awareness, and working-age people will need to start thinking about their needs in later life.
One applicable model for improving understanding of similar issues is how the Australian pension industry operates its ‘Retirement Standard’. This sets out a series of potential retirement outcomes (“modest retirement”, “comfortable retirement”, etc) with illustrative examples of the standard of living retirees can expect at each income level (such as whether they could afford annual foreign holidays, eating out once a week, etc). Evidence suggests that this sort of guidance can have a significant psychological impact, encouraging people to think seriously about their retirement goals.
One of the key advantages of the proposed new system of Universal Care Entitlement, topped up by a Care Supplement, is that it removes the disincentives associated with local authorities having to fund care. Councils don’t want to encourage retirement housing or social care provision in their area, because they don’t want the strain on their budgets which comes with an elderly population. This is one reason why there has been almost no expansion in social care provision in recent decades. Moving to a system where councils can access needs-based central funding would remove those disincentives, and encourage more provision.
The report also proposes a number of other ways to further encourage investment in housing for older people, including a new use class for this kind of development, with delivery targets to go with it. We are significantly behind other countries in this area, with only 0.6 per cent of UK retirees living in specialist retirement housing, compared to more than 5 per cent in the US and Australia. Not only can these sorts of housing solutions save money for government, they can also improve quality of life and reduce levels of loneliness among the older members of our society.
Social care isn’t the most glamorous or exciting area of public policy, which, coupled with its complexity, probably explains why it doesn’t get the attention it deserves in our public debate. Dementia isn’t exactly a nice thing to think about, after all. But over the course of our lives hardly any of us will go unaffected by these issues, either directly or indirectly.
There are millions of older people in this country who deserve dignity and a decent quality of life. Our social care proposals will give them that.
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