Britain’s crisis in care for the elderly

A government mired in Brexit has failed yet again to address an increasingly serious social issue. Yet there is an obvious way forward that has worked elsewhere. Simon Wilson reports.


Caroline Dinenage: frustrated and exasperated
(Image credit: Copyright (c) 2018 Shutterstock. No use without permission.)

What's happened?

April has come and gone, meaning that the UK government consumed by Brexit has missed yet another promised deadline for the release of its green paper (consultative policy document) on the future of social care in England. After the Cameron government failed to deliver on its promises of reform, the current government originally promised a green paper by "summer 2017". But for two years ministers have continually pushed back the deadline.

After missingthis latest one, they now merely say a paper will arrive "in due course". Even those running the show don't seem to understand the hold-up. Care minister Caroline Dinenage told a conference this week thata draft paper had been ready for months, and that she, like many others, was "frustrated and exasperated" it had not yet been published.

What is behind the delay?

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.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

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.

What's the scale of the issue?

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%).

What is to be done?

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.

Green's plan is to make funding national, not local, to reduce the pressure on local authorities; scrap means-testing; give everyone a basic level of funding as needed (paid for by taxing the winter fuel allowance and, if necessary, by a modest one point increase in national insurance for people aged over 50); and encourage the better-off to make extra private, insurance-based provision for themselves.

Currently, care-home residents are eligible for local authority funding only where their assets, which may include the value of their home, are less than £23,250 (a figure unchanged since 2010). For domiciliary care, local authorities vary widely, but the means test must be at least as generous as the care-home means test, and the value of the house is always excluded.

Is there a ceiling?

No, there is no upper limit to what an individual might need to spend on funding their care. 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".

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.