Time to care
Labour can show itself ready to govern by taking tough decisions on paying for the country’s care needs
With George Osborne’s admission last autumn that the coalition will fail to meet its self-imposed target of eliminating the deficit by 2015 threatening to extend the ‘era of austerity’ into the next parliament, many have assumed that the country faces a once-in-a-generation Herculean task to balance its books.
Not so, according to a recent IPPR report which predicted that with tax revenues remaining broadly flat and spending on health, social care and pensions rising, by 2030 Britain will once again slip into deficit.
While some long-term demographic trends are relatively easy to predict, others are not: the state of the economy and long-term growth rates, advances in health and medicine, the productivity of the public sector, technological innovation and behavioural change all affect the state of the public finances. Nonetheless, it is clear that the ‘care crunch’ – the twin crises in childcare and social care –will need to be the focus of radical and far-reaching thinking.
An understanding of the links between spending on childcare, health and social care need to inform Labour’s response. And, whatever the government’s pretensions to taking tough and difficult decisions, it appears none-too-keen to confront those posed by long-term care for the elderly.
But inaction is no longer an option. The Dilnot Commission on the Funding of Care and Support, which reported to the government a year ago this month, called the current system ‘confusing, unfair and unsustainable’. Care costs can be ‘high and unpredictable,’ it argued. Indeed, a quarter of people aged 65 today can expect to spend over £50,000 – those with assets over £23,250 receive no financial state support – with one in 10 spending over £100,000. There are huge local variations in services, and the absence of either state or private provision to pool the risks of high care costs makes the system akin to a lottery.
As local council budgets come under further pressure from government spending cuts, this situation can only get worse. Age UK estimates that of the two million older people in England with care-related needs, nearly 800,000 are unable to get any formal support for care. This is not only profoundly distressing for those affected, it also makes little economic sense. Cuts in social care are already driving up health spending, increasing the number of emergency admissions to hospitals and delaying discharges.
Labour is right to seek cross-party consensus for Dilnot’s ‘shared responsibility model’, where both state and individual make a contribution.
However, even its limited recommendations – that an individual’s contribution to adult social care costs should be capped at £35,000 and the asset threshold for those in residential care beyond which no means-tested help is given should rise to £100,000 – would have cost £1.7bn in 2011.
Meanwhile, childcare in many ways mirrors social care: the amount families spend on childcare in the UK is the second highest in the OECD; provision is still not universal; and the quality of care is too variable. And there are few signs of this situation improving: costs rose by nearly six per cent in 2012, according to the Daycare Trust; the coalition has cut the amount of childcare costs that low-income families can claim from tax credits; and 250 children’s centres are expected to close over the next year.
The coalition’s approach is self-defeating, threatening to drive up the effective tax rate of working parents and hindering mothers on low incomes from returning to work. By contrast, expanded universal childcare would boost the employment rate, particularly for women, expand tax revenues, and bolster the long-term sustainability of the public finances, helping to pay the costs of social care. Indeed, IPPR estimates a net return of £20,000 over four years in terms of tax revenue minus the costs of childcare for every woman who returns to full-time work after one year on maternity leave.
Despite this, upfront investment in ensuring all children aged between one and four have up to 25 hours’ free childcare a week could cost nearly £7bn a year in addition to the £2.7bn the government already intends to spend.
These issues will force Labour into a much wider debate about universalism. Polling indicates that public support for this principle is much stronger in the case of services – schools, hospitals and children’s centres – than it is for benefits. That said, those who wish to see a return to the contributory principle in welfare, and who welcome the consensus which now stretches across the political spectrum on protecting the value of the basic state pension, need to be clear about which universal benefits they would restrict.
There will need to be an explicit trade-off between the building of new universal services in childcare and social care and cuts in ‘welfare for the wealthy’. Together, a commitment to scrap winter fuel payments and free TV licences for better-off pensioners or free bus travel for the over-60s to fund social care, and a halving of higher-rate tax relief on pension contributions to expand universal childcare, would be politically brave moves for Labour’s leader. And they would also underline that he is serious about governing for the long term, not just playing the short-term political game.
Age UK, Care, care crunch, childcare, Dilnot commission, health, pensions, social care, winter fuel payments