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A Possible solution to social care funding crisis?

Why is it that other countries found a solution to social care funding? During the last month we have seen some ripples of concern from politicians about the continuing delay in the publication of the Governments green paper on social care reform. Damian Green, the former work and pensions secretary who originally commissioned the green paper, has apparently got fed up waiting for it. This week he published his ideas in the form of a paper from the Centre for Policy Studies. But this has failed to gain much support across party benches.

What is behind the delay? According to Simon Wilson (Money Week), Brute politics. Social care for the elderly is a complex and multi-generational issue that requires broad political consensus and good faith to address – but instead gets weaponised for partisan gain. And this government is not strong enough to even float contentious ideas, let alone legislate. The nub of the issue is obvious to all: people are living longer, and funding good-quality care for them in old age will get much more expensive. But in recent decades all attempts to tackle it have proven politically toxic. Gordon Brown’s solution was to place a levy on estates after death, which was skewered by the electioneering Cameron as a “death tax”. Seven years later, Theresa May’s 2017 election campaign collapsed when her own plan – a kind of state-sponsored equity-release scheme with the guarantee that no one need pay anything from their last £100,000 of assets, more than four times the current level of protected assets – was condemned as a “dementia tax”. And so it goes on.

Scale of the problem The number of people older than 75 is now about 5.3 million, but this is projected to double in the next 40 years, meaning that the amount we need to spend on care of the elderly will surge. Annual spending on care for the elderly is currently around £18bn, but that’s not enough even now – a shortfall of around £2.5bn a year – and, according to sector experts, an estimated 1.2 million elderly people are already missing out on the care they need. The King’s Fund, the widely respected healthcare think tank, warned last week that the system in England was at “crisis point”, with council spending on social care £700m lower than in 2010 in real terms (even as public spending on the NHS has risen by 10%). The fund projects the annual shortfall to widen to £6bn a year by 2030 – as expenditure (growing at 2.1% a year) fails to keep up with demand (3.7%).

Is there a ceiling? Previous recent attempts to reform the system (the 1999 Royal Commission, the 2011 Dilnot Commission and the Tories’ ill-fated 2017 proposals) have been based on dramatically increasing the level of assets protected by the means test and/or introducing a lifetime cap on liabilities. By contrast, Green’s idea is to ignore assets, and instead base funding on a new system explicitly modelled on state and private pensions. In this scenario, everyone receives a basic level of funding regardless of their assets (a “Universal Care Entitlement”). In addition, those who can afford it take out insurance-based funding for higher-quality or more expensive care (a “Care Supplement”), funded either by long-term savings or equity release. It’s an approach that’s more akin to the successful systems operating in Germany and Japan – two countries which began ageing earlier and faster than Britain and have pioneered the most comprehensive responses.

What do Germany and Japan do? Both have systems which centralise funding and revenue-raising, then dole out funds again to be delivered locally. “That must make sense,” argues Camilla Cavendish in the Financial Times. England’s localised system “piles insult upon injury” since the poorest local authorities are those with some of the greatest levels of need. Germany began a mandatory long-term care insurance system in 1995, when “its care system looked about as frayed as England’s does now”. Workers pay a compulsory levy, employers contribute half, and the retired continue to pay. Japan brought in a similar system in 2000, with a national care tax paid by workers over 40. In both countries, the introduction of such a long-term solution required maturity, pragmatism and cross-party consensus. How depressing then, yet how predictable, that Green’s idea of a one percent surcharge – about £308 a year for the average taxpayer aged 50 to 64 – was immediately slapped down by the Labour shadow chancellor, John McDonnell, as “a tax on getting old”.

Summary As the Government continues with its delay on the publication of the Green Paper thousands of people are being denied there right to social care. This is not just an economic issue but a party-political issue. As Germany and japan have proved over many years a solution can be found that is acceptable and meets the needs of the people. One can only assume that they were able to create a system of social care funding on the back of agreement from across the political spectrum. An agreement that is hard to envisage in British politics today. Albert Cook Albert Cook BA, MA & Fellow Charted Quality Institute Managing Director Bettal Quality Consultancy

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