For the coalition government, and for any future Labour government, the choices around adult social care funding in England can really be boiled down to two questions.
The first is: what is the state going to spend on care and support in future and how will this money be spent?
The second is: where will this money come from?
As Patrick Diamond acknowledges in the Purple Papers, just maintaining the current social care funding system will cost more to the exchequer in future, owing to population ageing. But this existing system is widely felt to be in desperate need of an overhaul: support is unpredictable and varies by postcode; unmet need is pervasive; individuals can be left facing ‘catastrophic costs’; carers are overburdened. The list of problems is a long one.
Prior to the last election, the Labour government proposed replacing means-testing with universal free personal care. This would have been an expensive policy in the long term and the bill could not have been met just through imposing a small levy on the value of estates.
Since then, the Dilnot commission has proposed a ‘halfway house’ to free personal care called the ‘capped cost’ model. This has been widely backed by stakeholders and charities keen to ensure that the long-term care funding reform agenda remains on the road. The ‘capped cost’ model would cost the exchequer less than implementing free personal care. However, most of the extra public spending required to implement the ‘capped cost’ model would ultimately be directed at the wealthiest 40 per cent of older households. This underlines Diamond’s point that at a time of fiscal austerity, those who benefit from reform should be the ones to pay for it.
Interestingly, in its formal response to the Dilnot commission , the coalition government said it accepted the principles underlying the ‘capped cost’ model, but wanted to explore different ways of implementing them in addition to the Dilnot commission recommendations. This also creates space for Labour in opposition to explore how best to implement the principles put forward by the Dilnot commission.
In truth, there are various refinements possible. This includes the proposal put forward by Labour around the time of its 2010 social care white paper that local authorities would take over the funding of personal care for those who have lived in residential care for more than two years and have paid for this care themselves up to that point. This proposal actually looks a lot like the Dilnot commission’s subsequent ‘capped cost’ model, but might sidestep the worries raised by some stakeholders around the challenges of implementing the Dilnot commission recommendations in practice.
However, as important as these policy design questions are, they are still ultimately secondary to the bigger question: where will the money come from? There is growing recognition that the cost of a fairer, more generous care funding system in England should not just be shifted on to the working-age cohort. The baby-boomer cohort has accumulated unprecedented housing wealth and it appears inevitable that we will have to look to these households to contribute something of this wealth to a better care system.
The various options for this – inheritance tax, capital gains tax, the creation of a ‘National Care Fund’ – are ultimately preferable to some other options touted around. It has recently become fashionable in policy debate to call for the means-testing of ‘pensioner benefits’ such as the winter fuel allowance, subsidised bus travel and free TV licences for the over-75s. However, two problems stand out. First, there is no acceptable, functioning mechanism available to means test who receives these. The means tested pension credit system is widely acknowledged to be broken, and – according to the government’s own estimates – there are an astonishing 1.3 million pensioners who fail to receive the extra means-tested support they are entitled to. Second, in different ways, ‘pensioner benefits’ actually represent an effective form of ‘directed’ support to the older population that is more effective than, for example, the state pension.
Given that just maintaining the current system will cost more in future, these difficult questions are unavoidable. With the clock ticking until the next election, Labour will need to have a clear plan, for it will have answer them.
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James Lloyd is director of the Strategic Society Centre, an independent, non-partisan thinktank based in London, which tweets @__SSC
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