How much longer will we have to wait for the long promised green paper on social care, let alone some sort of policy resolution?
We were told more than two years ago that it would be published by the end of 2017. Then it was supposed to be Summer 2018, then the Autumn. New health secretary Matt Hancock then promised it by April this year. It will now be published “at the earliest opportunity”.
This represents a continuation of decades of failure by all parties to fix a lacuna in our welfare state. The private sector does not provide effective insurance against long term care costs before the costs arise. For those with assets that means they risk losing all those assets if they happen to need long term care. Big costs hit only a small minority. There is an obvious solution. It’s called social insurance. We all pay in through the tax system in one way or another and those who need support get it.
That’s effectively how the NHS works. The last big review of the social care system, led by Andrew Dilnot, proposed a version of social insurance. In this version those who could afford it would pay the first tranche of cost – he suggested up to £35,000 – and then the state would pick up the rest for the few who need more.
It has been objected that, compared to today, this would benefit the relatively well-to-do who currently have to pay for themselves. That’s true. But so does not means testing access to the NHS. And the current system acts randomly, hitting just a few unlucky and relatively well-off individuals. A progressive tax – perhaps on income in retirement, perhaps on housing, perhaps on inheritance – to fund a social insurance system would be much “fairer” on most definitions of that word.
Both main parties have played politics over this issue, around the 2010 election, around the 2017 election, and at most points between. It has been little short of disgraceful.
To repeat the problem. We have a system in which individual families face a big financial risk they cannot sensibly insure against. Look at it that way and one of the apparent successes of recent policy also looks a bit shaky. I’m referring to pension policy, and in particular automatic enrolment.
By contrast to social care there is considerable cross party consensus that automatic enrolment into pensions has been a good thing and that it has succeeded. It was dreamed up by a Labour government, implemented by a Liberal Democrat minister, and has been continued under the Conservatives. As a result, membership of workplace pensions is at a record high. It’s been a great, perhaps unsung, success of public policy.
You were waiting for a but weren’t you? Well here it is. But. This success is perhaps not quite all that it seems. One problem is that, especially with interest rates as low as they are, the low level of contributions into these schemes may well not provide a decent level of resources in retirement. And there is a more fundamental problem too.
Rather as is the case with our current system of social care funding, nearly all these schemes leave all the risks with individuals. What you get out depends just on what you put in and how lucky you are with your investments. If the scheme earns poor returns you lose. There is no insurance.
Contrast that with old style defined benefit (or final salary) pension schemes in which, however imperfectly, risk was shared across employees and employers. We have successfully killed those off near enough completely in the private sector. That’s another story of policy failure for another day.
Not only that but with so called “pension freedoms”, few of these pension pots will be used to buy an actual pension. They look far more like individual savings accounts then they do pensions. Nothing wrong with that, except we shouldn’t bank on them providing pensions and we shouldn’t bank on people insuring themselves against living a long time, which is what pensions (or annuities) are supposed to do.
One does not need to be a socialist to recognise that some risks are best shared, at least to some extent. That’s true of health, a fact we recognise to its fullest possible extent. It is also true of social care, a fact our current system barely recognises at all. And it’s true of pensions, a fact we used to recognise rather more than we do today.
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